Chattisgarh High Court

Yash Rice Mill vs State Of Chhattisgarh on 16 January, 2023

                                    1



                                                                      NAFR
                 HIGH COURT OF CHHATTISGARH AT BILASPUR
                           WPC No. 83 of 2023

    Yash Rice Mill 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 (C.G.)

                                                            ---- Petitioner

                                 Versus

   1. State Of Chhattisgarh Through Secretary, Food Civil Supplies And
      Consumer Protection Department, Mahanadi Bhawan, Mantralaya,
      Capital Complex, Atal Nagar, Nawa Raipur, Dist. 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, Dist.
      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, Dist.
      Raipur Chhattisgarh.

   5. District Marketing Officer Chhattisgarh State Cooperative Marketing
      Federation Limited, Mahanadi Bhawan, Atal Nagar, Nawa Raipur, Dist.
      Raipur Chhattisgarh.

   6. Collector Gourela-Pendra-Marwahi, District Gourela-Pendra-Marwahi
      (C.G.)

   7. Managing Director State Civil Supplies Corporation Nawa Raipur, Atal
      Nagar, District Raipur (C.G.)

   8. State Bank Of India Branch Pendra Road, Through Its Branch
      Manager, State Bank Of India, Pendra Road, District Gourela-Pendra-
      Marwahi (C.G.)
                                                          ---- Respondent

For Petitioner : Mr. Manoj Paranjpe, Advocate For State : Mr. Chandresh Shrivastava, Addl. A.G.

For Respondent No.2 to 5 : Mr. Amrito Das, Advocate with Mr. P. Acharya, Panel Lawyer For Respondent No. 8 : Mr. P.R. Patankar, Advocate For Intervenor : Dr. N.K. Shukla, Sr. Advocate with Mr. Shailendra Shukla, Advocate

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

16/01/2023

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 izkM s DV] 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-jacket 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