K.R.Construction Co. vs Gail India Ltd. & Anr.
2009 Latest Caselaw 335 Del

14
*     IN THE HIGH COURT OF DELHI AT NEW DELHI

                                               Pronounced on: 02.02.2009

+                       W.P. (C) 2520/2007


      K.R.CONSTRUCTION CO.                           ..... Petitioner
                     Through: Mr. D. Moitra, Advocate.

                  versus


      GAIL INDIA LTD. & ANR.                          ..... Respondents
                       Through: Mr. Arijit Mazumdar, Advocate.


      CORAM:
      HON'BLE MR. JUSTICE S. RAVINDRA BHAT

1.    Whether the Reporters of local papers
      may be allowed to see the judgment?

2.    To be referred to Reporter or not?

3.    Whether the judgment should be
      reported in the Digest?

      S.RAVINDRA BHAT, J. (ORAL)

% Issue Rule. Mr. Arijit Mazumdar, Advocate waives notice on rule. With

consent of counsel for the parties, the matter was finally heard.

2. The petitioner seeks directions to quash the holiday or black listing

order issued against it. The consequential relief of a direction to allow the

petitioner to participate in further tender processes, has also been sought.

3. The petitioner claims to be a contractor engaged in mechanical

maintenance and allied activities. It had been an enlisted contractor with

respondent - Gas Authority of India Limited (GAIL) for a long period of time.

The petitioner further contends that it successfully completed various

projects and works for the GAIL worth Crores of Rupees. In terms of the

averments, the business relationship between the two organizations has

subsisted since 1991. It is alleged by the petitioner that the GAIL abruptly

and without granting any explanation, stopped the petitioner from

participating in its tender processes. The petitioner adverts to

representations made to GAIL in this regard in 2003, 2005 and 2006. In one

such representation dated 14.4.2006, the petitioner claims that three years

had passed and that no reasons for the black listing had been intimated. It

also alleged that the holiday/black listing was made known to him for the

first time on 5.8.2005.

4. The GAIL in its return has not denied having a business relationship

with the petitioner. It, however, adverts to events which led to a vigilance

enquiry. The copy of the Chief Vigilance Officer's report dated 19.9.2002 is

on the record. According to the document, the petitioner had furnished an

experience certificate dated 10.5.1997 stating that it was the sub-contractor

of one M/s Blue Star for fine water distillation network at Indian Oil

Corporation Limited, Panipat. It was stated in the said vigilance report that

M/s Blue Star could not verify a certificate furnished by the petitioner. When

called upon to furnish proof of its genuineness, the petitioner was unable to

do so. The Chief Vigilance Officer, therefore, recommended black listing.

5. The GAIL has produced the copies of the Circular dated 25.9.2002 by

which the petitioner was black listed permanently. The same is extracted

below: -

"GAS AUTHORITY OF INDIA LIMITED UP PETROCHEMICAL COMPLEX PATA CONTRACT & MATERIAL MANAGEMENT DEPARTMENT Ref: GAIL/UPPC/C&P/GM-CELL/084/2002 25th September, 2002

SUB: BLACK LISTING OF FIRMS FOR FUTURE BUSINESS WITH GAIL

Named below due to submission of false/forged documents in order to secure Contracts it has been decided to BLACK LIST M/S K R Construction and their partners against one of the tenders floated by GAIL.

Sl.               Name of Partner                      Address
01                Sh. Rakesh Chaubey,             Near Water Tank
                  S/o Late Sh. Moti Lal Chaubey   Dibhopur.

02                Sh. Umesh Chaubey
                  S/o Late Sh. Moti Lal Chaubey     - Do -

03                Sh. B.P. Ojha,
                  S/o Sh. Rajnarain Ojha          Kauharpur
                                                  Post Alaunpur
                                                  Dist. Fazabad.
04                Sh. A.K. Chaubey
                  S/o Sh. Moti Lal Chaubey        Near Water Tank
                                                  Dibhopur.

05                Sh. P.K. Chaubey
                  S/o Sh. Moti Lal Chaubey            -Do-

06                Sh. Vinod Kr. Dubey
                  S/o Sh. Munnalal Dubey          Village Hirrni,
                                                  P.O. Khatia, Aurayya.

Consequently there will not be further dealing with this party or their partners in future. All concerned are requested to take note of above and ensure compliance.

(R SHARMA) General Manager (C&P)

6. The petitioner contended that the black listing order, impugned in this

case has a permanence which cannot be upheld by the Court. It was also

contended that the said order was never served upon the petitioner, who

was not given any opportunity of hearing before its issuance. In the

circumstances, he, therefore, asks for a order to quash the said order.

7. The GAIL, on the other hand, contends that the black listing order

cannot be attacked as arbitrary. The petitioner was granted time to furnish

the details to establish the veracity of the experience certificate. Upon its

inability to do so, the GAIL was constrained to issue the black listing order.

The petitioner's awareness of that order stands established from its repeated

representations against it, copies of which are on the record. GAIL,

therefore, urges this Court not to intervene under Article 226 of the

Constitution.

8. The preceding discussion would show that there is no dispute about

issuance of the black listing order on 25.9.2002. The same has been

extracted above. Although, GAIL refutes the charge of violation of principle

of natural justice, no material has been placed on record to suggest that a

show cause notice seeking the petitioner's explanation and further warning

of the intended consequence of black listing, was ever issued to the

petitioner. The Supreme Court's judgment reported as Erusian Equipments

and Chemicals Ltd. v. State of West Bengal (AIR (1975) SC 266) and a

decision reported as Raghu Nath Thakur v. State of Bihar and Ors., AIR

1989 SC 620 are authority for the proposition that having regard to the

adverse nature of black listing orders, the public agency should adhere to

principles of natural justice by issuing a show cause notice, granting

adequate opportunity and issuing a speaking order. Where the Agency

proposes a drastic order of black listing for a long period of time, the onus of

applying fairness standards is even greater. In this case, apart from the

contents of the vigilance report which shows that petitioner was asked to

produce a certificate, there is no material pointing to a specific show cause

notice having been issued before the black listing order.

9. This Court is of the opinion that aside from the fatal infirmity to the

black listing order noticed above, the impugned order also cannot be

sustained because it suffers from the vice of permanence. It virtually forbids

the petitioner from engaging in any business or commercial transactions with

GAIL. Such an order is plainly unreasonable as it is absolutely

disproportionate. While a public agency may chose not to enter into contract

with a specific individual or concerned, for determined malpractices or mis-

behaviour, even for a long duration - say 5 years, its decision to never enter

into contract or commercial transactions, would be utterly violation of

Articles 14 & 19 (1) (g) of the Constitution of India. It amounts to a

permanent ban of business with such citizen of concerned, even when the

particular business is available and otherwise lawful for all others. Such an

indefinite or permanent term of black listing, therefore, cannot be sustained.

10. For the above reasons, the Writ Petition deserves to be allowed.

Therefore, the impugned Circular dated 25.9.2002 is hereby quashed. The

respondents shall hereafter consider the petitioner's offers or applications on

their merits and in accordance with law.

The Writ Petition is allowed in the above terms. No costs.

S. RAVINDRA BHAT (JUDGE) FEBRUARY 02, 2009 /vd/