M/S Gail India Limited & Anr. vs M/S K.R. Construction Company
2009 Latest Caselaw 1851 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI


        +         LPA No. 151/ 2009 & C.M. Nos. 5060-61/2009

        M/S GAIL INDIA LIMITED & ANR.               ..... Appellants
                        Through:   Mr. Ajit Pudussery, Advocate.

                            versus

        M/S K.R. CONSTRUCTION COMPANY           ..... Respondent
                       Through: Mr. D. Moitra, Advocate.

CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE NEERAJ KISHAN KAUL
                   ORDER

%                  04.05.2009

C.M. No. 5061/2009 (for delay)

1.      Heard.

2. For the reasons mentioned in the application, the delay of 21

days in filing the appeal is condoned and the application stands

disposed of.

LPA No. 151/ 2009 & C.M. No. 5060/2009 (for stay)

3. The present appeal is preferred against the order of the learned

Single Judge dated 2nd February, 2009. The respondent (the original

petitioner in the Writ Petition) claims to be a contractor engaged in

mechanical maintenance and allied activities. It had been an enlisted

contractor with the appellant- Gas Authority of India Limited (in

short 'GAIL') for a long period of time. The business relationship

between the appellant (the original respondent in the Writ Petition)

and the respondent herein has subsisted since 1991. It was alleged

in the writ petition by the respondent that GAIL abruptly and without

granting any explanation stopped the respondent from participating

in its tender processes. As per the respondent, three years passed

and no reasons for black listing had been intimated and the factum

of black listing was made known to him for the first time on 5th

August, 2005. The appellants did not deny having a business

relationship with the respondent. It however, refered to a Vigilance

Enquiry which was conducted and a copy of the Chief Vigilance

Officer's report dated 19th September, 2002 was also placed on

record. As per the appellants, the respondent had furnished a false

experience certificate and when called upon to furnish its

genuineness, the respondent was unable to do so. The Chief

Vigilance Officer, therefore, recommended black listing. The GAIL also

produced before the learned Single Judge copies of the circular dated

25th September, 2002, by which the respondent was black listed

permanently.

4. The respondent's case in the writ petition was that the black

listing order had a permanence which could not be upheld by the

Court. It was also contended that the said order was never served

upon the respondent who was not given any opportunity of hearing

before its issuance. In the circumstances, it was thus contended that

the order ought to be quashed.

5. On behalf of the GAIL, it was contended that the respondent

had been granted time to furnish 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. No material could be

placed by GAIL on record to suggest that a show-cause notice seeking

the respondent's explanation and further warning of the intended

consequence of black listing was ever issued to the respondent.

6. The learned Single Judge relying on judgments of the Supreme

Court, rightly held 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. The learned Single Judge

rightly held that in the present case, apart from the contents of the

vigilance report which show that respondent was asked to produce a

certificate, there was no material pointing to a specific show-cause

notice having issued before the black listing order.

7. The learned Single Judge thus held that aside from the fatal

infirmity to the black listing order noticed above, the impugned order

also could not be sustained because it suffered from the vice of

permanence. It virtually forbade the respondent from engaging in

any business or commercial transactions with GAIL. Such an order,

as per the learned Single Judge, was plainly unreasonable as it was

absolutely disproportionate. We see no infirmity in the findings of

the learned Single Judge to warrant any interference.

8. However, we deem it fit and proper, in the interest of justice, to

permit the appellants to issue, if they so choose to do, a fresh show-

cause notice to the respondent in case they intend to initiate action

for black listing the respondent. The appellants must follow proper

procedure as established by law and adhere to principles of natural

justice by issuing a show-cause notice, granting adequate

opportunity to the respondent to explain his case and thereafter issue

a speaking order. Needless to say that it would be open to the

respondent to challenge the said order in accordance with law. The

impugned order is modified only to this limited extent. The appeal is

accordingly disposed of in terms of what has been stated

hereinabove. The pending application also stands disposed of.

CHIEF JUSTICE

NEERAJ KISHAN KAUL, J May 04, 2009 sb