Shyam Food Products, Gourela vs State Of Chhattisgarh
2023 Latest Caselaw 221 Chatt

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                                                                            AFR
            HIGH COURT OF CHHATTISGARH AT BILASPUR
                      Writ Petition (C) No.116 of 2023

   Shyam Food Products, Gourela, A Proprietorship Firm, Having Its
   Registered Office At Rani Durgawati Industrial Area Anjani, Gourela,
   Through Its Sole Proprietor Namely Shri Gopal Krishna Agrawal, S/o Shri
   Fakir Chand Agrawal, Aged About 47 Years, R/o. Samta Nagar, Ward No.
   15, Gourela, Tehsil Pendra Road, Police Station Gourela, District Gourela -
   Pendra - Marwahi Chhattisgarh.
                                                                 ---- Petitioner
                                  Versus
1. State of Chhattisgarh Through Secretary, Food Civil Supplies and
   Consumer Protection Department, Mahanadi Bhawan, Mantralaya, Capital
   Complex, Atal Nagar, Nawa Raipur, District Raipur Chhattisgarh.
2. Chhattisgarh State Cooperative Marketing Federation Limited, Through Its
   General Manager, Chhattisgarh State Cooperative Marketing Federation
   Limited, Mahanadi Bhawan, Atal Nagar, Nawa Raipur, District Raipur
   Chhattisgarh
3. General Manager, Chhattisgarh State Cooperative Marketing Federation
   Limited, 6th Floor, Tower C, Commercial Complex, CBD Sector-21, Nawa
   Raipur, Atal Nagar, Raipur, District Raipur Chhattisgarh
4. Managing Director, Chhattisgarh State Cooperative Marketing Federation
   Limited, Mahanadi Bhawan, Atal Nagar, Nawa Raipur, District Raipur
   Chhattisgarh.
5. District Marketing Officer, Chhattisgarh State Cooperative Marketing
   Federation Limited, District Gourela - Pendra - Marwahi Chhattisgarh
6. Collector, Gourela - Pendra - Marwahi, District Gourela - Pendra -
   Marwahi, Chhattisgarh
7. Managing Director, State Civil Supplies Corporation Nawa Raipur, Atal
   Nagar, District Raipur Chhattisgarh
8. State Bank of India, Branch Pendra Road, Through Its Branch Manager,
   State Bank of India, Pendra Road, District Gourela - Pendra - Marwahi
   Chhattisgarh.
                                                            ---- Respondents

WPC No. 147 of 2023

1. Shyam Industries Anjani, Gourela, A Proprietorship Firm Having its Registered Office At Rani Durgawati Industrial Area Anjani, Gourela, Through Its Sole Proprietor Namely Shri Fakir Chand Agrawal, S/o Late Shri Niranjan Lal Agrawal, Aged About 75 Years, R/o Samta Nagar, Ward No.15, Gourela, Tehsil Pendra Road, Police Station Gourela, District : Gaurela-Pendra-Marwahi, Chhattisgarh.

---- Petitioner Versus

1. State of Chhattisgarh Through Secretary, Food Civil Supplies and Consumer Protection Department, Mahanadi Bhawan, Mantralaya, Capital Complex, Atal Nagar, Nawa Raipur,, District : Raipur, Chhattisgarh

2. Chhattisgarh State Cooperative Marketing Federation Limited Through Its General Manager, Chhattisgarh State Cooperative Marketing Federation Limited, Mahanadi Bhawan, Atal Nagar, Nawa Raipur, District : Raipur, Chhattisgarh.

3. General Manager Chhattisgarh State Cooperative Marketing Federation Limited, 6th Floor, Tower C, Commercial Complex, CBD Sector-21, Nawa Raipur Atal Nagar, Raipur, District : Raipur, Chhattisgarh.

4. Managing Director Chhattisgarh State Cooperative Marketing Federation Limited, Mahanadi Bhawan, Atal Nagar, Nawa Raipur, District : Raipur, Chhattisgarh.

5. District Marketing Officer Chhattisgarh State Cooperative Marketing Federation Limited, District : Gaurela-Pendra-Marwahi, Chhattisgarh

6. Collector Gourela-Pendra-Marwahi, District : Gaurela-Pendra-Marwahi, Chhattisgarh.

7. Managing Director State Civil Supplies Corporation Nawa Raipur, Atal Nagar, District : Raipur, Chhattisgarh

8. State Bank of India Branch Pendra Road, Through Its Branch Manager, State Bank of India, Pendra Road, District : Gaurela-Pendra-Marwahi, Chhattisgarh.

---- Respondents WPC No. 176 of 2023

1. Yash Modern Food Products Gourela, A Proprietorship Firm, Having Its Registered Office At Rani Durgawati Industrial Area Anjani, Gourela, Through Its Sole Proprietor Namely Shri Ashish Agrawal, S/o Shri Fakir Chand Agrawal, Aged About 40 Years, R/o Samta Nagar, Ward No. 15, Gourela, Tehsil Pendra Road, Police Station, Gourela, District Gourela- Pendra-Marwahi, Chhattisgarh.

---- Petitioner Versus

1. State of Chhattisgarh Through Secretary, Food Civil Supplies and Consumer Protection Department, Mahanadi Bhawan, Mantralaya, Capital Complex, Atal Nagar, Nawa Raipur, District Raipur, Chhattisgarh.

2. Chhattisgarh State Cooperative Marketing Federation Limited Through Its General Manager, Chhattisgarh State Cooperative Marketing Federation Limited, Mahanadi Bhawan, Atal Nagar, Nawa Raipur, District Raipur, Chhattisgarh.

3. General Manager Chhattisgarh State Cooperative Marketing Federation Limited, 6th Floor, Tower C, Commercial Complex, C.B.D. Sector-21, Nawa Raipur, Atal Nagar, Raipur, District Raipur, Chhattisgarh

4. Managing Director Chhattisgarh State Cooperative Marketing Federation Limited, Mahanadi Bhawan, Atal Nagar, Nawa Raipur, District Raipur, Chhattisgarh.

5. District Marketing Officer Chhattisgarh State Cooperative Marketing Federation Limited, District Gourela- Pendra- Marwahi, Chhattisgarh

6. Collector Gourela- Pendra- Marwahi, District Gourela- Pendra- Marwahi, Chhattisgarh.

7. Managing Director State Civil Supplies Corporation Nawa Raipur, Atal Nagar, District Raipur, Chhattisgarh

8. State Bank of India Branch Pendra Road, Through Its Branch Manager, State Bank of India, Pendra Road, District Gourela- Pendra- Marwahi, Chhattisgarh.

____

---- Respondents For Petitioners : Shri Manoj Paranjpe, Shri Ashok Soni and Shri Shreyansh Agrawal, Advocates.

For State : Shri Chandresh Shrivastava, Additional Advocate General.

For Respondents 2 to 5 : Shri Amrito Das, Advocate. For Respondent No.8 : Shri P.R. Patankar, Advocate. For Respondent No.7 : Shri Anish Tiwari, Advocate. For Intervenor : Dr. NK Shukla, Sr. Advocate along with Ms.Priya Mishra and Shri Himank Saluja, Advocates.

Hon'ble Shri Justice P. Sam Koshy Order on Board

12.01.2023

1. Since common facts and issues are involved in these three writ petitions,

they are being disposed of by this common order.

2. Challenge in these writ petitions is primarily to the impugned order

Annexure P/1 dated 29.12.2022. Vide the impugned order apart from

blacklisting of the petitioners, the authorities have imposed further

restrictions upon them. For ready reference the operative part of the order

impugned is reproduced hereinunder :

**vr% mijksDr mYysf[kr vfu;ferrkvksa ds dkj.k jkbZl fey ';ke b.MLVzht vatuh xkSjsyk] ';ke QwM izksMDV] vatuh] xkSjsyk] ;'k jkbZl fey vatuh xkSjsyk ,oa ;'k ekMuZ QwM izksMDV] vatuh xkSjsyk ds fo:) fu;ekuqlkj dk;Zokgh vknsf'kr fd;k tkrk gS& 1- ';ke b.MLVzht vatuh xkSjsyk] ';ke QwM izksMDV] vatuh] xkSjsyk] ;'k jkbZl fey vatuh xkSjsyk ,oa ;'k ekMuZ QwM izksMDV] vatuh xkSjsyk dks vkxkeh vkns'k rd [kjhQ foi.ku o"kZ 2022&23 gsrw dkyh lwph esa ntZ fd;k tkrk gSA 2- [kjhQ foi.ku o"kZ 2022&23 esa bu feyjksa ls vkxs dLVe fefyax dk dk;Z u djk;k tkosA bu feyjksa ds }kjk mBk;s x;s /kku ds fo:) lh,evkj vuqca/k vof/k esa ekdZQsM dh ns[kjs[k esa tek djk;k tkosA ;fn vuqca/k vof/k esa pkoy tek ugh djk;k tkrk gS rks feyjksa ds fo:) izpfyr fu;eksa ds rgr dk;Zokgh lqfuf'pr dh tkosA 3- [kjhQ foi.ku o"kZ 2022&23 es bu 4 feyksa dks /kku ds mBko gsrq vkxs dksbZ Mh-vks- tkjh u fd;k tkosA 4- feyjksa ds fo:) NRrhlx< dLVe fefyax pkoy miktZu vkns'k 2016 ds rgr fu;ekuqlkj dk;Zokgh dysDVj] xkSjsyk&isUMzk&ejokgh }kjk lqfuf'pr dh tkosA**

3. The primary contention that the counsel for petitioners raises is that the

petitioners before being inflicted with the order of blacklisting have never

been issued with any show cause notice, nor opportunity of defence was

given to the petitioners at any point of time. All that the notices that were

issued to the petitioners were one which was dated 23.12.2022, Annexure

P/14. The contents of the said notice also is silent so far as the proposed

action on the part of the respondents, rather it was only a notice calling

upon the petitioners to appear before the concerned authority for an

enquiry in respect of certain allegations made against the petitioners so far

as the bank guarantees that they had furnished. For ready reference the

contents of the said notice dated 23.12.2022 is reproduced hereinunder :

**mijksDr fo"k;karxZZr o"kZ 2021&22 esa /kku mBko gsrq vkids }kjk ftyk foi.ku dk;kZy; xkSjsyk&isUM~k&ejokgh dks tek dh xbZ cSad xkjaVh ds laca/k esa izkIr f'kdk;r dh tkWp dh tk jgh gSA mDr f'kdk;r ds lanHkZ esa fnukad 27-12-2022 fnu eaxyokj dks iwokZUg le; 11%00 cts dk;kZy; dysDVj] xkSjsyk&isUM~k&ejokgh esa tkWp ny ds le{k c;ku gsrq mifLFkr gksuk lqfuf'pr djsaA**

4. According to the petitioners, apart from the said notice there has been

nothing further that has been issued to the petitioners before the impugned

order Annexure P/1 dated 29.12.2022 was passed. It is the further

contention of the petitioners that as per Annexure P/14 dated 23.12.2022

the petitioners were called upon to appear for the enquriy on 27.12.2022

and the impugned order has been passed on 29.12.2022 with only one

days gap. This again shows that the respondent authorities have taken a

decision in much haste and with a predetermined approach. The

petitioners further submits that when they appeared before the authorities

on 27.12.2022 they prayed for making available the nature of complaint

and the allegations that were levelled against them. They also had given

statement before the authorities on the said date, but thereafter there has

been no further development that have transpired to the knowledge of the

petitioners except for the enquiry that was conducted on their back and the

final order that was passed by Annexure P/1 dated 29.12.2022. Thus,

learned counsel for the petitioners submits that the entire action and

passing of the impugned order is in blatant violation of the principles of

natural justice and the same deserves to be set aside/quashed.

5. The counsel for the respondents, however opposing the petition submits

that it is a clear case of fraud that the petitioners have played with the

respondents and that they had fraudulently made use of certain fake bank

guarantees which were never issued by the respondents-Bank. That, on

the basis of those fake documents they had undertaken the

contract/agreement with the respondents and had performed their

business. These are all matters which are evident from the records

available with the respondents and the petitioners do not dispute this facts

in any manner. Therefore, looking into the gravity of the allegations the

impugned order had to be passed.

6. It was the further contentions of the respondents that for the alleged fraud

that the petitioners have played FIR before the concerned Police Station

were also lodged against the petitioners and other erring officials of the

respondents. According to the respondents taking into consideration the

gravity of the misconduct/fraud that the petitioners have played, it would

not be in the interest of the department as also for the State to carry on

business with the petitioners who have obtained those contracts by playing

fraud. It would also not be in the interest of the department to deal with

such fraudulent players and thereby such an order has been passed.

7. The respondents have also taken the ground that it would had been an

empty formality if the respondents would called upon the petitioners to

explain in respect of their conduct when the allegation, fraud and the

nature of complaint is writ large from the documents itself particularly from

the statement/correspondence that has been received from the

respondent No.8-Bank.

8. All said and done, undisputed fact is that before issuance of the impugned

order Annexure P/1 dated 29.12.2022 which is an order of blacklisting and

also banning of further business with the petitioners, no show cause

notices were ever issued to the petitioners in respect of the action taken by

the respondents. Neither was the petitioners called upon to give their

explanation on the allegations and complaint that was lodged against them

in respect of the fraud. Admittedly, no documents also was served upon

the petitioners in respect of the complaint that was received against the

petitioners.

9. The law so far as blacklisting of an establishment is concerned by now

well settled by the Hon'ble Supreme Court more particularly in two of the

recent decisions, the first being that of Gorkha Security Services v.

Government (NCT of Delhi) and Ors., (2014) 9 SCC 105.

10. Hon'ble Supreme Court in the said judgment in paragraph 16 referring to

an earlier decision of the Hon'ble Supreme Court has held as under :-

"Necessity of serving show cause notice as a requisite of the Principles of Natural Justice:

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."

11. The law laid down in the said judgment has been recently reiterated by the

Hon'ble Supreme Court again in the case of UMC Technologies Private

Limited Vs. Food Corporation of India & Another, (2021) 2 SCC 551,

wherein again Hon'ble Supreme Court in paragraph 13,14, 19 & 21 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. Assistant Custodian General, Evacuee Property, Lucknow and Anr.,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, particularized and unambiguous show cause notice is particularly crucial due to the severe consequences of blacklisting and the stigmatization 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 takes 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."

12. Relying upon the aforesaid two judgments of the landmark decisions of the

Hon'ble Supreme Court this Court also very recently in WPC No. 15 of

2022 in the case of Shri Krishna Infra Developers v. State of Chhattisgarh

& Others vide its judgment dated 13.01.2022 had allowed the writ petition

under similar set of facts. Similar view have also been taken by this Court

in case of R. P. Bhojanwala v. State of Chhattisgarh & Others, in WPC

2828/2007 which stood allowed on 31.08.2016 relying upon the principle

and ratio laid down by the Hon'ble Supreme Court in the case of Gorkha

Securities(Supra).

13. So far as the question of the principles of an empty formality is concerned,

the said fact also came up for consideration before the Division Bench of

this court in M/s SK Patodia & Associates Vs. State of Chhattisgarh &

Others, WPC No.4758 of 2021, wherein dealing with the aspect, the

Division Bench in paragraph 33 to 35 held as under:

"33. A consideration of the judgments cited by Mr. Sharma would go to show that principles of natural justice are very flexible principles and they cannot be applied in any straight- acket formula. The principles of natural justice are grounded on the doctrine of procedural fairness. There are divergent views with regard to "useless formality" theory which is pressed into service in cases where facts can be stated to be admitted or indisputable and as only one view is possible, it is considered that a fair hearing would make no difference to the ultimate conclusion reached by the decision maker. The theory is based on the principle that the Court need not pass futile orders of setting aside or remand when there is, in fact, no prejudice caused. However, there is no doubt that it is not permissible for the authority to ignore compliance of the principles of natural justice presuming that it would be a "useless formality". It would be for the Court to determine on the facts of the case as to whether grant of opportunity will serve any useful purpose or not. Thus, in a given situation, the Court may not consider it necessary to strike down an action because of violation of principles of natural justice and refer the matter back to the authorities to take a fresh decision after complying with the procedural requirements when failure to comply with principles of natural justice did not cause any prejudice to the person against whom the action is taken.

34. On the other hand, decisions cited by Mr. Bharat is in respect of the issue of blacklisting that has arisen in the instant case and thus, to the point. In clear, unambiguous and unequivocal terms, the Hon'ble Supreme Court has emphatically laid down that serving of a show-cause notice proposing to blacklist is a sine qua non and condition precedent before an order of blacklisting can be passed.

35. In view of such authoritative pronouncements of Hon'ble Supreme Court in the matter of blacklisting, we do not propose to go into the question on the touchstone of "useless formality" theory, canvassed by Mr. Sharma."

14. Given the aforesaid settled legal position and judicial precedents of the

recent past, this Court has no hesitation in holding that the impugned

order Annexure P-1 dated 29.12.2022 is apparently in contravention to the

settled legal position. The said impugned order admittedly has been

issued without compliance of the basic principles of natural justice as the

petitioners were unheard before being inflicted with the order of

blacklisting. The said order therefore in the given factual backdrop and

legal position is not sustainable and same deserves to be and is

accordingly set aside/quashed with consequences to follow.

15. Accordingly, all the writ petitions stand allowed and disposed of to the

aforesaid extent.

16. It is made clear that since the impugned order Annexure P/1 dated

29.12.2022 is being interfered by this Court only on the technical ground

of it being violative of principles of natural justice, the right of the

respondents stand reserved for taking appropriate steps in accordance

with law ensuring compliance of the principles of natural justice.

Sd/-

(P. Sam Koshy) Judge inder