V.L. Mahajan And Anr. vs Chief Executive Officer, Zilla ...
2004 Latest Caselaw 586 Bom

JUDGMENT

D.D. Sinha, J.

1. Heard Shri De, learned counsel for the petitioners and Shri Chaudhari, learned counsel for the respondents.

2. Writ Petition is directed against the communications dated 1-11-1990 whereby the security deposit in respect of contract allotted to the petitioners was forfeited and the name of the petitioners was blacklisted. The petitioners were also informed that they shall not be given any works henceforth.

3. Shri De, learned counsel for the petitioners contended that the petitioners at the relevant time were the partners of V.V. Constructions Company, dealing in construction work. The said firm was registered under the Indian Partnership Act, 1932. The petitioners company was doing construction work for Zilla Parishad, Wardha, for a long time and because of their satisfactory execution of work, their tender for the following works was accepted :

i) The construction of staff quarters for Primary Health Centre at Kannamwar Gram, pay group No. 2, estimated rate Rs. 2,07,315/-as per order dated 12-2-1998.

ii) The construction of staff quarters for Primary Health Centre at Kannamwar Gram, pay group No. 3, estimated rate of Rs. 1,57,573/- as per order dated 27-1-1988.

iii) The construction of staff quarters for Primary Health Centre at Kannamwar Gram, pay group No. 4, estimated rate of Rs. 1,27,824/- as per order dated 27-1-1988.

4. The petitioners started the work and the construction was continued up to lintel level, however, the petitioners were compelled to discontinue the construction activity since the necessary material for the civil work was not supplied by respondent No. 1 as per the terms and conditions of the tender/work order. The construction activity was required to be stopped by the petitioners for want of necessary material on 20th April 1988.

5. Shri De, learned counsel further states that the petitioners by letters dated 26-7-1988, 31-8-1988 and 23-9-1988 requested the respondents to supply the necessary material as early as possible in order to start the construction work allotted to the petitioners. The learned counsel contended that the petitioners could not complete the work within the stipulated time as the respondents did not supply the material required for construction work nor they made payment as per the agreement. It is submitted that the stoppage of construction activity is only on account of non supply of requisite material by the respondents and therefore, the petitioners are not to be blamed for stoppage of construction activity. It is contended that the respondents all of a sudden unilaterally, without any notice to the petitioners terminated the contract vide communications dated 1-11-1990, forfeited the security deposit and blacklisted the petitioners. The said communications are impugned in the present petition, however, the relief claimed by the petitioners is restricted only in respect of action taken by the respondents of blacklisting the petitioners.

6. Shri De, learned counsel for the petitioners contended that the action of the respondents in blacklisting the petitioners is violative of principles of natural justice and is, therefore, not sustainable in law since the petitioners were not given an opportunity of being heard before issuing the impugned communications dated 1-11-1990. In order to substantiate this contention, reliance is placed on the decision of the Supreme Court in the case of Southern Painters v. Fertilizers and Chemicals Travancore Limited, .

7. Shri Chaudhari, learned counsel for the respondents does not dispute the fact that the respondents could not supply the necessary material required for construction activity at the relevant time, however, contended that the original period within which the petitioners were to complete the construction work mentioned in the agreement was extended. Since the petitioners could not complete the construction work under tender even within the extended period, the respondents had terminated the contract and forfeited the security deposit of the petitioners as well as blacklisted the petitioners.

8. We have considered the contentions canvassed by the learned counsel for the respective parties. In the instant case, in view of the facts and circumstances referred to hereinabove, it is evident that the construction work which was required to be completed by the petitioners company under contract of tender could not be completed by the petitioners for want of requisite material necessary for the construction in question. It appears that the petitioners from time to time sent letters of request to the respondents to supply the requisite material to complete the construction work under the tender, however, the respondents failed to do so and therefore, the petitioners could not carry out the work under tender within the stipulated period. Be that as it may, in the instant case, it is not in dispute that the respondents terminated the contract under tender and forfeited the security deposit as well as blacklisted the petitioners' firm unilaterally without giving any opportunity of being heard to the petitioners prior to issuance of impugned communications dated 1-11-1990. We are not required to adjudicate the validity of all the actions of the respondents since the petitioners have restricted relief in the present writ petition only in respect of the validity of the action taken by the respondents of blacklisting the petitioners. It is no doubt true that action of blacklisting the petitioners would undoubtedly hamper and affect their reputation and in a given case may result in penal consequences. It is a well settled law that if the action of the authority results in penal consequences, the same cannot be taken unless an opportunity of being heard is given to the person against whom such action is required to be taken otherwise, the action would be violative of principles of natural justice. The relevant observations of the Apex Court in this regard are in paras 6 and 7 of the judgment which reads thus :

"The minority view of Justice Mathew is now the law. The majority view in V. Punnen Thomas's case (supra) is not good law and must be considered to have been, impliedly, overruled by the Erusian's case. Indeed, in Joseph Vilangandan v. Executive Engineer, Buildings and Roads (PWD) Division, Ernakulam, , it was held:

"The majority judgment of the Kerala High Court, inasmuch as it holds that a person is not entitled to a hearing, before he is blacklisted, must be deemed to have been overruled by the decision of this Court in Erusian Equipment (ibid).." .

7. In Erusian Equipment and Chemicals Ltd. v. State of West Bengal, , this Court observed :

"The State need not enter into any contract with any one but if it does so, it must do so fairly without discrimination and without unfair procedure. Reputation is a part of a person's character and personality. Blacklisting tarnishes one's reputation.

Exclusion of a member of the public from dealing with a State in sales transactions has the effect of preventing him from purchasing and doing a lawful trade in the goods in discriminating against him in favour of other people."

"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."

9. In view of the above observations of the Apex Court, it is evident that the impugned action of blacklisting the petitioners by the respondents in the facts and circumstances of the case is violative of principles of natural justice and cannot be sustained in law.

10. For the reasons stated hereinabove, we hereby set aside the part of the impugned communications dated 1-11-1990 which pertains to the blacklisting of the petitioners. Writ Petition is allowed in above terms.

11. There shall be no order as to costs.