M/S. Gupta Freight Carrier Thr. ... vs The Executive Director, West ...
2022 Latest Caselaw 3639 Bom

                                                                                WP2055.21(J).odt
                                                 1



              IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                        NAGPUR BENCH, NAGPUR.

                          WRIT PETITION NO.2055 OF 2021

          M/s. Gupta Freight Carrier,
          through its Proprietor-Shri Vishal
          Pannalal Gupta,
          Near Pathyapustak Office,
          Pravin Nagar, Amravati.
          Tq. And District Amravati.
                                                                      .... PETITIONER

                                  // V E R S U S //

1.        The Executive Director,
          West Zone, Zonal Office (West),
          Third Floor, Datta Pada Road,
          Rajendra     Nagar,     Boriwali(E),
          Mumbai-400 066

2.        Food Corporation of India (FCI),
          Through its General Manager,
          Having its regional office at Chetak
          Bhavan, Maharana Pratap Nagar,
          Bhopal-462 011.
                                                                   ... RESPONDENTS

------------------------------------------------------------------------------------------------------
Shri S.P.Dharmadhikari, Senior Advocate with Shri S.M.Vaishnav,
Advocate for petitioner.
Shri S.R.Deshpande, Advocate for respondents.
------------------------------------------------------------------------------------------------------

CORAM : A. S. CHANDURKAR AND SMT. M.S.JAWALKAR, JJ.
ARGUMENTS WERE HEARD ON :08/03/2022
JUDGMENT IS PRONOUNCED ON : 05/04/2022
                                                            WP2055.21(J).odt
                                    2



J U D G M E N T (Per : A.S.CHANDURKAR, J.)

RULE. Rule made returnable forthwith and heard the

learned counsel for the parties.

2. The challenge raised in this writ petition is to the order

dated 02.03.2021 passed by the Food Corporation of India (for short,

FCI) terminating the contract that was issued to the petitioner for

transportation of foodgrains from Hoshangabad (Madhya Pradesh) to

Badnera (Maharashtra) as well as from Hoshangabad to Dhamangaon

(Maharashtra) for a period of two years. Besides such termination of the

contract, the earnest money deposited by the petitioner has been

forfeited. The petitioner has also been debarred from participating in any

future tender of the FCI for a period of five years. The grievance raised

by the petitioner against the aforesaid order was considered by the

Grievance Redressal Committee constituted by the FCI and the same was

also rejected on 28.05.2021. That order is also under challenge in this

writ petition.

3. The facts relevant for adjudicating the writ petition are that

on 13.10.2019 a tender notice was issued by the FCI inviting bids for

transportation of foodgrains from Hoshangabad (MP) to Badnera(MS) WP2055.21(J).odt

and Hoshangabad (MP) to Dhamangaon(MS). The bid of the petitioner

being the lowest, it was accepted by the FCI and on 20.03.2020 work

order was issued to it. As per Clause 7 of the Model Tender Format

(MTF) that was published by the FCI, a successful bidder was required

within a period of fifteen working days of acceptance of the tender to

furnish security deposit for due performance of the obligations under the

contract. As per that Clause on failure to submit such Bank Guarantee

within a period of fifteen working days of acceptance of tender, a further

extension of fifteen working days was permissible subject to levy of

penalty. In the event of further failure to submit the Bank Guarantee

within the extended period, it was stated that the contract would be

summarily terminated and earnest money was liable to be forfeited. The

contractor was also to be debarred from participating in any future

tender of the FCI for a period of five years. On 01.10.2020 the FCI issued

notice to the petitioner in which it was stated that on 08.06.2020 the

petitioner had submitted various documents but the Bank Guarantees

had not been furnished. It was stated that submission of the Bank

Guarantee was a pre-requisite of the contract and the same was required

as per Clause 7 of the MTF. In view of Covid-2019 pandemic, the FCI by

that notice granted final opportunity to furnish Bank Guarantees within a WP2055.21(J).odt

period of three days of issuance of the said notice failing which it was

stated that a decision would be taken as per the provisions of the MTF.

4. The petitioner on 28.12.2020 replied to the aforesaid notice and

conveyed to the FCI various difficulties faced by it as the reason for not

being able to furnish the Bank Guarantees. It also referred to an order

passed by the Collector, Amravati with regard to various restrictions that

were imposed on account of Covid-2019 pandemic. It is thereafter that

on 02.03.2021 the FCI noted that the Bank Guarantees as required had

not been furnished and therefore the petitioner had violated Clause 7 (iv)

of the MTF. It was stated that on this count the contract was terminated

with immediate effect by forfeiting the security deposit. The petitioner

was also debarred from participating in any future tender of the FCI for a

period of five years. The petitioner made a representation with the

Grievance Redressal Committee constituted by the FCI but that

representation was not favourably considered and the same was

accordingly rejected. The aforesaid has thus given rise to the present writ

petition.

5. Shri S.P.Dharmadhikari, learned Senior Advocate for the petitioner

at the outset submitted that the petitioner was principally challenging the WP2055.21(J).odt

order of blacklisting and the same having effect for a period of five years.

The petitioner was not desirous of completing the contract that was

awarded by the FCI. The order of blacklisting was bad in law for the

reason that in the show cause notice dated 01.10.2020 the FCI did not

state that on failure to furnish the Bank Guarantees the petitioner would

be blacklisted. Merely by stating that the FCI would take a decision as

per the provisions of the MTF would not indicate that the FCI intended to

blacklist the petitioner for its failure to furnish the Bank Guarantees. The

proposed action of blacklisting ought to have been mentioned in the show

cause notice. It was a settled position of law that the penalty/action

proposed by the Principal ought to be indicated in the show cause notice

itself and mere reference to the provisions of the MTF would not be

sufficient. The petitioner had no idea whatsoever that it would be visited

by an order of blacklisting for its failure to furnish the Bank Guarantees.

If such notice would have been issued to it indicating the action

proposed, the petitioner would have suitably replied to the same

indicating as to why there is no reason to blacklist the petitioner. In that

regard the learned Senior Advocate placed reliance on the decisions in

Gorkha Securities Services vs. Government (NCT of Delhi) and ors.

(2014) 9 SCC 105 and Vetindia Pharmaceuticals Ltd. vs. State of Uttar WP2055.21(J).odt

Pradesh and anr. (2021) 1 SCC 804 to submit that the show cause notice

ought to indicate the action proposed to be taken against the noticee.

It was then submitted that no opportunity of hearing was

granted to the petitioner before passing the impugned order of

blacklisting the petitioner. If such opportunity would have been granted

to the petitioner it would have demonstrated that the harsh order of

blacklisting was not liable to be passed as the inability to furnish the bank

guarantees within a stipulated time was on account of reasons beyond

the control of the petitioner. In absence of any opportunity to do so, the

petitioner was precluded from putting up its side of the story before the

FCI. Consequence of an order of blacklisting being grave and resulting in

civil death, it was necessary that such opportunity be granted prior to

blacklisting the affected party. In support of said submission the learned

Senior Advocate placed reliance on the decisions in Kulja Industries Ltd.

vs. Chief General Manager, Western Telecom Project Bharat Sanchar

Nigam Ltd. and ors. (2014) 14 SCC 731, Sarku Engineering Services vs.

Union of India and ors. (2016) 5 AIR Bom R 417, Daffodills

Pharmaceuticals Ltd. and anr. vs. State of U.P. and anr. 2019 SCC Online

SC 1607, UMC Technologies Private Ltd. vs Food Corporation of India

and anr. (2021) 2 SCC 551, and Writ Petition No.3857/2021 (M/s. Aai WP2055.21(J).odt

Tuljabhawani Transport vs. Union of India and ors .) decided on

04.10.2021. On this count too the order of blacklisting was liable to be

set aside.

Yet another contention raised was that the order of

blacklisting for a period of five years was grossly disproportionate to the

breach of the MTF as alleged. There was no reason indicated as to why

the petitioner had been blacklisted for a period of five years. Merely

because the maximum period for which a tenderer could be blacklisted

was five years, the same would not mean that blacklisting for a period of

five years was warranted. Such action of blacklisting was not automatic

and the FCI ought to have considered whether in fact an order of

blacklisting for a period five years was warranted. The reply filed by the

petitioner to the show cause notice had not been considered and had the

same been considered, it was likely that the petitioner would not have

been blacklisted or the order of blacklisting would have been passed for a

lesser period than five years. Since there was no consideration of the

aspect of proportionality while blacklisting the petitioner for a period of

five years, this Court in exercise of jurisdiction under Article 226 of the

Constitution of India could examine the same. On these counts, it was

submitted that the order of blacklisting passed by the FCI was liable to be WP2055.21(J).odt

set aside.

6. Per contra, Shri S.R.Deshpande, learned Advocate for the

respondents at the outset questioned the tenability of the writ petition on

the ground that the Bench of the High Court at Nagpur did not have any

territorial jurisdiction to entertain the writ petition filed by the petitioner.

It was stated that since no part of the cause of action arose at Nagpur, the

writ petition itself was not maintainable at the Nagpur Bench. The

contract in question was executed at Mumbai and the foodgrains were to

be transported from Hoshangabad (MP). The petitioner had not

indicated as to which part of cause of action had arisen at Nagpur. In

that regard, the learned counsel relied upon the decisions in Hindustan

Petroleum Corporation Ltd. vs. Ramgopal Baliram Soni 2011 (5) Mh.L.J.

944 and Sachin Chotu Pawar vs. Collector Raigad and ors. 2020 (6)

Mh.L.J. 285. It was thus submitted that the writ petition was not liable to

be entertained on merits.

Without prejudice to the aforesaid, it was submitted by the

learned counsel that the order of blacklisting was preceded by a proper

show cause notice dated 01.10.2020. In the said show cause notice,

there was a specific reference to Clause 7 of the MTF wherein the

consequence of not furnishing the Bank Guarantee within stipulated WP2055.21(J).odt

period would result in blacklisting had been specifically mentioned. The

petitioner having signed the contract in question it was aware about the

terms and conditions under the contract as well as the consequence of

not furnishing the Bank Guarantee. Thus, after due notice to the

petitioner the order of blacklisting was passed. Moreover, the petitioner

failed to seek an opportunity of hearing after submitting its reply to the

show cause notice. The petitioner ought to have sought such opportunity

but failed to do so. The order dated 02.03.2021 had been passed after

considering the communications made by the petitioner and after due

application of mind. It therefore could not be said the FCI committed an

error while blacklisting the petitioner. It was then submitted that the

Grievance Redressal Committee also considered the representation made

by the petitioner and even at that stage the petitioner had not sought to

question the order of blacklisting as being excessive in nature and

therefore disproportionate. It was therefore submitted that there was no

ground whatsoever raised by the petitioner to warrant interference in

writ jurisdiction. The learned counsel placed reliance on the judgment in

Writ Petition No.6426/2019 (M/s.Yogiraj Powertech Pvt. Ltd. vs. State of

Maharashtra, through its Secretary, Industries, Energy and Labour

Department and ors.) decided at the Aurangabad Bench of this Court on WP2055.21(J).odt

20.12.2019 in that regard. It was thus submitted that the writ petition

was liable to be dismissed.

7. In reply to the aforesaid, it was submitted that the learned

Senior Advocate for the petitioner that this Court had territorial

jurisdiction to entertain the writ petition. The food-grains were being

delivered at Badnera and Dhamangaon in Maharashtra which was within

the territorial jurisdiction of this Bench. Since part of the cause of action

had arisen within the territorial jurisdiction of the High Court, the

petitioner had rightly filed the writ petition before the Nagpur Bench. It

was sufficient that some part of cause of action arose within the territorial

jurisdiction of this Court. The decisions relied upon by the learned

Advocate for the respondents were not applicable to the facts of the

present case.

8. We have heard the learned counsel for the parties at length

and with their assistance we have also perused the relevant documents

on record. We have thereafter given due consideration to their rival

submissions. The adjudication of the aforesaid submissions can be

undertaken under the following heads namely, (a) territorial jurisdiction

(b) absence of proper show cause notice (c) absence of opportunity of WP2055.21(J).odt

hearing and (d) proportionality behind blacklisting the petitioner for a

period of five years.

9. (a) Territorial jurisdiction:

In this regard, when the work order dated 20.03.2020 is

perused, it is seen that the petitioner was required to transport food-

grains from the godowns of the FCI at Hoshangabad (MP) to Badnera

(MS) and Dhamangaon(MS). The food-grains were to be unloaded at

Badnera (MS) and Dhamangaon(MS) which fall within the territorial

jurisdiction of this Bench. As a consequence of the order dated

02.03.2021 terminating the contract for failure to furnish the Bank

Guarantees, the petitioner was required to discontinue such transport of

food-grains. Since the food-grains were to be transported to Badnera

(MS) and Dhamangaon (MS), it is clear that part of cause of action as

contemplated by Article 226 (2) of the Constitution of India arises within

the territorial jurisdiction of this Bench. Though it was urged on behalf of

the respondents that the impugned order dated 02.03.2021 was issued

by the Regional Office of the FCI at Bhopal, Madhya Pradesh, that by

itself would not be a reason to hold that this Court lacks territorial

jurisdiction to entertain the challenge to the order dated 02.03.2021. As WP2055.21(J).odt

a consequence of termination of the contract, the petitioner is precluded

from transporting the foodgrains to Badnera and Dhamangaon. Further,

an order of blacklisting has also been passed against the petitioner. This

has also affected the conduct of business of the petitioner. It is well

settled that even if part of cause of action arises within the territorial

jurisdiction of this Court, the writ petition can be entertained on that

basis. Reference in this regard can be made to the decision in Kusum

Ingots & Alloys Limited vs. Union of India (2004) 6 SCC 254 . The

decisions relied upon by the learned counsel for the respondents in

Hindustan Petroleum Corporation Ltd and Sachin Chhotu Pawar (supra)

are distinguishable on facts and ratio therein cannot be applied to the

facts of the present case. It is accordingly held that the writ petition is

liable to be entertained on merits as this Bench has territorial jurisdiction

to do so.

10. (b) Absence of proper show cause notice:

According to the learned Senior Advocate for the petitioner,

though the show cause notice dated 01.10.2020 was issued by the FCI

stating therein that there was a failure to submit the Bank Guarantees

within the specified period, the show cause notice did not specifically WP2055.21(J).odt

indicate that failure to do so would result in the petitioner firm being

blacklisted. Since an order of blacklisting results in harsh civil

consequences, the show cause notice as issued ought to have indicated

the proposed action of blacklisting on failure to furnish the Bank

Guarantees.

11. A perusal of the show cause notice dated 01.10.2020

indicates that the FCI has stated that timely submission of Bank

Guarantees was a pre-requisite of the contract and the petitioner had

failed to complete the formalities in that regard. Thereafter in the notice

it has been stated as under:

"As per Clause No.7(iv) of 'General Information to Tenders' & IX (e) of 'Terms and conditions governing contracts for transportation of foodgrains from Depot/ Mandi etc' of RTC MTF "In the event of the Tenderer's failure, after the communication of acceptance of the tender by the Corporation, to furnish the requisite Security Deposit under Clause 7(i)a by the due date or requisite Security Deposit in the form of Bank Guarantee under 7(i)b & 7(i)c including extension period (applicable to submission of BG only), his Contract shall be summarily terminated besides forfeiture of the Earnest Money and the Corporation shall proceed for appointment of another contractor. Any losses or damages arising out of and incurred by the Corporation by such conduct of the contractor will be recovered from the contractor, without prejudice to any other rights and remedies of the Corporation WP2055.21(J).odt

under the Contract and Law. The contractor will also be debarred from participating in any future tenders of the Corporation for a period of five years. After the completion of prescribed period of five years, the party may be allowed to participate in the future tenders of FCI provided all the recoveries/dues have been effected by the Corporation and there is no dispute pending with the contractor/party."

Hence, looking at the COVID-19 Pandemic, you are hereby provided an final opportunity to furnish the Bank Guarantees (with copy of SFMS) along with complete documentary evidence for delay within a period of three days of the issue of this letter, failing which decision shall be taken as per provisions of MTF."

It is seen that reference has been made to Clause 7 of the MTF to indicate

the consequences of failure to furnish the Bank Guarantees. One of the

consequences is debarment for a period of five years. It is stated that on

failure to furnish the Bank Guarantees a decision as per the provisions of

the MTF would be taken. This notice has been replied by the petitioner

after which an order of blacklisting has been passed.

Clause 7(iv) of MTF reads as under:

"(iv) In the event of the Tender's failure, after the communication of acceptance of the tender by the Corporation, to furnish the requisite Security Deposit under Clause 7(i)a by the due date or requisite Security Deposit in the form of Bank Guarantee under 7(i)b & 7(i)c including extension period (applicable to submission of BG only), his Contract shall be WP2055.21(J).odt

summarily terminated besides forfeiture of the Earnest Money and the Corporation shall proceed for appointment of another contractor. Any losses or damages arising out of and incurred by the Corporation by such conduct of the contractor will be recovered from the contractor, without prejudice to any other rights and remedies of the Corporation under the Contract and Law. The contractor will also be debarred from participating in any future tenders of the Corporation for a period of five years. After the completion of prescribed period of five years, the party may be allowed to participate in the future tenders of FCI provided all the recoveries/dues have been effected by the Corporation and there is no dispute pending with the contractor/party."

12. In Gorkha Securities Services (supra) the question

considered was with regard to the requirement of stating the action that

is proposed to be taken against the noticee while issuing a show cause

notice. It was held that in matters pertaining to blacklisting, the

requirement to indicate the proposed action is imperative. In order to

fulfill the requirement of the principles of natural justice the show cause

notice should meet the following requirements namely, the

material/grounds to be stated which necessitates an action and particular

penalty/action that is proposed to be taken. It was then further stated

that even if it was not specifically mentioned in the show cause notice but

if it could be clearly and safely discerned from a reading thereof, then the WP2055.21(J).odt

same would be sufficient to meet this requirement. Similar issue was

considered in UMC Technologies (P) Ltd. (supra) which also arose in

proceedings to which FCI was a party. It was held that for a show cause

notice to constitute a valid basis of a blacklisting order, such notice must

spell out clearly the action proposed or its contents must be such that it

can be clearly inferred therefrom that there is an intention on the part of

the issuer of the notice to blacklist the noticee. Such a clear notice is

essential to ensure that the person against whom the penalty of

blacklisting is intended has an adequate, informed and meaningful

opportunity to show cause against his possible blacklisting. It was found

in that case that the show cause notice did not expressly propose the

action of blacklisting nor could the same be inferred from the language

employed by the FCI in its show cause notice. It was found that Clause

10 of the instructions to bidders which according to the FCI was the

source of its power to blacklist the noticee was not mentioned in the

show cause notice. On that count the order of blacklisting was set aside

since it travelled beyond the bounds of the show cause notice. A

somewhat similar view has been taken in Vetindia Pharmaceuticals Ltd.

(supra).

WP2055.21(J).odt

13. When the show cause notice dated 01.10.2020 is considered

in the light of the aforesaid legal position, it becomes clear that in the

show cause notice the FCI had stated that timely submission of the Bank

Guarantee was a pre-requisite of the contract which had not been

complied with by the petitioner. Reference was made to Clause 7(iv) of

the MTF and after reproducing that Clause, it was stated that a final

opportunity to furnish the Bank Guarantees within a period of three days

was being given, failing which it was stated that the FCI would take a

decision as per the provisions of the MTF. On a plain reading of the show

cause notice, it becomes clear that the proposed action of blacklisting can

clearly and safely be discerned from the show cause notice. By

specifically quoting and reproducing Clause 7(iv) of the MTF in the show

cause notice which Clause stipulates the consequence of debarment on

failure to furnish the Bank Guarantee, no other inference can be drawn

from the show cause notice. The impugned order of blacklisting has also

been passed in the light of Clause 7(iv) of the MTF. By issuing the show

cause notice the petitioner was called upon to furnish the Bank

Guarantees as prescribed within a period of three days and it was also

stated that on failure to furnish the Bank Guarantees, a decision would be

taken as per the provisions of the MTF. The FCI had clearly expressed its WP2055.21(J).odt

intention of proceeding under Clause 7(iv) of the MTF on failure to

furnish the Bank Guarantee. When the show cause notice reproduced

Clause 7(iv) of the MTF and also stated that action would be taken

accordingly as provided under the MTF, it was not necessary to again

specifically state that on failure to furnish the Bank Guarantees, the

petitioner's firm would be blacklisted. A prudent contractor on perusing

the show cause notice would immediately gather that the FCI was seeking

compliance of the condition pertaining to furnishing of Bank Guarantees

and by reproducing Clause 7(iv) of the MTF, its intention to blacklist the

petitioner was clear. Hence the contention raised on behalf of the

petitioner that the show cause notice ought to specifically state that on

failure to furnish the Bank Guarantees an order of blacklisting would be

passed is not liable to be accepted since on a plain reading of the show

cause notice the intention of the FCI to blacklist the petitioner has been

clearly indicated therein. It is thus held that the FCI had given a proper

show cause notice to the petitioner prior to blacklisting it. The order of

blacklisting is not vulnerable on that count.

14. (c) and (d): Absence of opportunity of hearing and proportionality behind blacklisting the petitioner for a period of five years:

WP2055.21(J).odt

The contention with regard to absence of proper opportunity

of hearing and the order of blacklisting being disproportionate now

requires consideration. According to the petitioner, it was not granted

any personal hearing before the order of blacklisting was passed. The

contents of the reply submitted by the petitioner on 28.12.2020 were not

taken into consideration while passing the impugned order terminating

the contract. It was urged that had an opportunity of personal hearing

been granted to the petitioner, it could have brought to the notice of the

FCI that for reasons beyond its control and on account of the pandemic

situation, it was not in a position to furnish the Bank Guarantees within

the stipulated period. On the contrary, according to the FCI, the

petitioner did not demand any opportunity of hearing. The reply

furnished by the petitioner was taken into consideration before passing

the order of blacklisting and hence the principles of natural justice were

complied with.

Perusal of the reply of the petitioner to the show cause notice

indicates that it had made an application on 25.03.2020 to the Syndicate

Bank for being issued bank guarantee for a sum of Rs.3,22,00,000/-

(Rs.Three Crores and Twenty Two Lakhs). Necessary documents were

submitted at the Syndicate Bank but in the meanwhile, in June 2020 WP2055.21(J).odt

Syndicate Bank was merged with Canara Bank. Thereafter lock down was

imposed by the Collector till 31.07.2020. Various other reasons related

to the pandemic situation were also quoted in the reply dated

28.12.2020. The petitioner has also sought to rely upon the letter issued

by the Chief Manager, Canara Bank on 24.12.2020. In that letter issued

to the Assistant General Manager, FCI it was stated that the petitioner's

proposal for issuance of the bank guarantee had been received by the

Bank. The earlier In-charge Officer had expired in July 2020 on account

of Covid. On amalgamation of Syndicate Bank with Canara Bank, there

was some difficulty in documentation and other compliances. It was

further stated that the application of the petitioner had been processed

and that it was likely to be sanctioned within a period of one month, if all

documents were found to be in place. It was stated that the letter was

issued on the request made by the petitioner. When the order dated

02.03.2021 terminating the contract is perused, it is seen that the FCI has

acted in accordance with Clause 7 (iv) of the MTF. There is reference to

the petitioner's letters dated 20.11.2020 and 28.12.2020 but it was

observed that the Bank Guarantees were not furnished. It is thereafter

that the action of debarment for failure to submit the Bank Guarantees

has been taken for a period of five years.

WP2055.21(J).odt

15. In Kulja Industries Ltd. (supra) it has been observed in

paragraph 17 as under:

"17. That apart, the power to blacklist a contractor whether the contract be for supply of material or equipment or for the execution of any other work whatsoever is in our opinion inherent in the party allotting the contract. There is no need for any such power being specifically conferred by statute or reserved by contractor. That is because "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. Between two private parties the right to take any such decision is absolute and untrammelled by any constraints whatsoever. The freedom to contract or not to contract is unqualified in the case of private parties. But any such decision is subject to judicial review when the same is taken by the State or any of its instrumentalities. This implies that any 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. The order itself being reasonable, fair and proportionate to the gravity of the offence is similarly examinable by a writ court."

The aforesaid decision indicates that an order of blacklisting can be

scrutinized not only on the touchstone of the principles of natural justice

but also on the doctrine of proportionality. Whether an order of WP2055.21(J).odt

blacklisting is reasonable, fair and proportionate to the gravity of the

offence can be examined by a writ Court. We may note that in Gorkha

Securities Services (supra) the Hon'ble Supreme Court has in paragraph

20 of its decision observed that once it is shown that a show cause notice

is given and an opportunity to reply to the show cause notice is afforded,

it would not be necessary to give an oral hearing to the noticee.

Reference was made to the decision in Patel Engineering Limited vs.

Union of India, (2012) 11 SCC 257 in that regard. We may note that in

UMC Technologies(P) Ltd. (supra) reference was made to the earlier

decision in Raghunath Thakur vs. State of Bihar (1989) 1 SCC 229

wherein it was held that even if the Rules did not expressly provide for, it

was an elementary principle of natural justice that the party affected by

an order should have the right of being heard and making the

representations against the order.

16. In the case in hand the show cause notice dated 01.10.2020

has been found to be a proper notice indicating the action of blacklisting

being proposed therein. This notice was replied by the petitioner on

28.12.2020. It is thus clear that due notice was given to the petitioner

and the order of blacklisting cannot be questioned on the count that the

petitioner was not heard before blacklisting it. However, considering the WP2055.21(J).odt

explanation sought to be furnished by the petitioner in its reply alongwith

the communication of the General Manager, Canara Bank dated

24.12.2020, on the aspect of proportionality of the period of blacklisting

for a period of five years we are of the view that before blacklisting the

petitioner for a period of five years, an opportunity of hearing ought to

have been extended to the petitioner in these facts. It is to be noted that

Clause 7(iv) of the MTF provides for debarment for a period of five years.

The decision to blacklist a contractor is within the jurisdiction of the

Principal and the Court would not substitute its opinion for that of the

Principal. However, when the aspect of proportionality of the order of

blacklisting for a period of five years is questioned, in the light of law laid

down in Kulja Industries Ltd. (supra) an opportunity of hearing to enable

the petitioner to put-forth the reasons for its inability to furnish the Bank

Guarantees within the stipulated period ought to have been granted in

the light of the pandemic situation during the relevant period while

determining the period for which the petitioner was to be blacklisted. It

need not be reiterated that the order of blacklisting has the effect of

depriving a party of the privilege and advantage of entering into a lawful

relationship with the State for undertaking business. As held in Erusian

Equipment and Chemicals Ltd. vs State of West Bengal (1975) 1 SCC 70 WP2055.21(J).odt

an order of blacklisting has an effect of depriving a person of equality of

opportunity in the matter of public contract. An order of blacklisting is

equivalent to civil death of the person concerned and is stigmatic in

nature. It is with these aspects in mind that the proportionality of the

order of blacklisting for a period of five years would have to be viewed.

We therefore find that the petitioner ought to have been granted an

opportunity of hearing at least on the aspect of duration of the period of

blacklisting which is five years. It is thus held that in the present case

absence of reasonable and meaningful opportunity of hearing on the

proportionality of the period of blacklisting ought to have been granted to

the petitioner and the petitioner is prejudiced to that extent.

17. We have noted the submission of the learned Senior

Advocate for the petitioner that the petitioner does not desire to further

carry out the contract in question. The grievance is specifically to the

order of blacklisting for a period of five years. In that view of the matter,

we find that the FCI ought to grant an opportunity of hearing to the

petitioner in the context of Clause 7(iv) of the MTF since the petitioner

has been debarred for a period of five years. Thus, while upholding the

decision of the FCI to debar the petitioner for failure to comply with the

terms and conditions of Clause 7(iv) of the MTF, the petitioner is liable to WP2055.21(J).odt

be heard on the period for which it ought to be debarred. This is for the

reason that even the Grievance Redressal Committee of the FCI has not

considered this aspect.

18. As a result of aforesaid discussion, the following order is

passed :

The order dated 02.03.2021 terminating the contract of the

petitioner dated 20.03.2020, forfeiting the earnest money and

blacklisting the petitioner is upheld. The FCI is however directed to grant

an opportunity of hearing to the petitioner as regards the period of

debarment. Such decision be taken by the FCI within a period of eight

weeks from today after hearing the petitioner on its own merits without

being influenced by any observation made in this regard since the Court

has not expressed any opinion on what would be the ideal period of

debarment.

The writ petition is partly allowed to the aforesaid extent.

Rule is made absolute in aforesaid terms with no order as to costs.

19. At this stage the learned counsel for the petitioner prays that

the interim order granted be continued for a period of four weeks. This

request is opposed by the learned counsel for the respondents.

WP2055.21(J).odt

In the facts of the case, present judgment shall operate after

a period of four weeks.

                                     (SMT. M.S.JAWALKAR,J)                (A.S.CHANDURKAR,J.)



                        Andurkar..




Digitally Signed byJAYANT S
ANDURKAR
Personal Assistant
Signing Date:
05.04.2022 18:10