Shoghi Communications Ltd. vs Union Of India & Anr.
2011 Latest Caselaw 343 Del

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* IN THE HIGH COURT OF DELHI AT NEW DELHI

71

+                  W.P.(C) 5547/2007 & CM APPL 10273/2007


 SHOGHI COMMUNICATIONS LTD                  ..... Petitioner
             Through: Mr. H.L. Tiku, Senior Advocate with
                      Mr. Ravi Kumar Aggarwal and
                      Ms. Bindu Monga, Advocates.

                   versus


 UNION OF INDIA & ANR                                         ..... Respondents
               Through:                   Mr. Jatan Singh, Advocate for UOI.


    CORAM: JUSTICE S. MURALIDHAR


                                    ORDER

% 20.01.2011

1. This is the second round of litigation concerning the blacklisting of

the Petitioner by an order dated 9th July 2005 issued by the Directorate

General of Military Intelligence („DGMI‟) and the consequential order

dated 19th September 2005 issued by the Ministry of Defence („MOD‟)

stating that on advice from the National Security Council Secretariat "it

would be desirable to avoid any contact with M/s Shogi

Communications Ltd („SCL‟)" and Mr. Harish Gupta.

2. Information was received from the Central Bureau of Investigation

(„CBI‟) on 11th May 2005 about Mr. Harish Gupta, Director (R&D) of

the Petitioner SCL having been chargesheeted in CBI case No. RC

9(S)/96-DLI for offences under Section 420 read with Section 511 IPC

and Section 469 and 471 IPC in 1996. The said communication pointed

out that the allegation against Mr. Harish Gupta was that "he

forged/used an End User Certificate purported to have been issued by

Communication Directorate of NSG for importing two systems T-1285

Customs Act including Key Generation Programme OPG-2002 and

crypts fill Device CFD-2001 during the year 1995-96. The offence

came to light when the said End User Certificate was referred back by

authorities to NSG for some changes." This led to an order dated 4th

July 2005 being issued by the office of the IFA (Army/M) addressed to

the DGMI that SCL and its two sister companies, Secure Telecom Pvt.

Ltd. (STPL) and Sidhi Tech Services Ltd. (STSL) should be deleted

from the vendor list and all transactions with the three companies

should be stopped forthwith.

3. The Petitioner challenged the validity of the CBI‟s communication

dated 11th May 2005, the order dated 4th July 2005 of the IFA, the order

dated 9th July 2005 of the DGMI and the consequential order dated 19th

September 2005 of the MOD blacklisting the Petitioner, by filing Writ

Petition (Civil) No. 1815 of 2007 in this Court. In that writ petition the

principal grounds of challenge were that the orders were passed without

issuing any notice to the Petitioner and, therefore, were violative of

principles of natural justice and that the blacklisting was for an

indefinite period.

4. The aforementioned Writ Petition (C) No. 1815 of 2007 was

disposed of by an order dated 9th March 2007 passed by the learned

Single Judge of this Court. The operative portion of the said order reads

as under:

"The petitioner is aggrieved by these orders/communications on the ground that these orders amount to virtual blacklisting without any fixed duration. Secondly, the blacklisting has been done without following the principles of natural justice i.e., without issuing any notice to the petitioner.

The learned counsel appearing on behalf of the respondents submitted that he is not admitting the fact that no notice was issued to the petitioner. However, the respondents would be willing to give a hearing to the petitioner so that all the aspects which the petitioner seeks to agitate before this court with regard to its blacklisting can be raised before the appropriate authority.

This writ petition is disposed of with the direction that the petitioner shall make a representation within a week to the Ministry of Defence through respondent No. 2 and, thereafter, the respondents shall nominate the appropriate authority before whom the petitioner may appear for a personal hearing. This would be done within 2 weeks thereafter. An appropriate order would be passed within 14 days after the date of hearing. It is made clear that this court has not expressed any opinion on the merits of the case. The order shall clearly indicate as to whether it concurs with the impugned orders/communications or not."

5. Consequent upon the above orders, SCL made a detailed

representation and was also given a hearing on 4th April 2007.

Thereafter, by the impugned order dated 19th April 2007 the Special

Secretary in the MOD passed a detailed order affirming the blacklisting

of the Petitioner.

6. Mr. H.L. Tiku, learned Senior counsel for the Petitioner first

submitted that SCL was incorporated only in November 1998 whereas

the criminal case against Mr. Harish Gupta was filed much earlier. The

chargesheet was filed in 1996 itself. SCL was therefore nowhere

involved in the said criminal case. Secondly, it is submitted that there

could be no indefinite blacklisting of the Petitioner from 2005 onwards

and this rendered the impugned order wholly arbitrary. Reliance is

placed on the decisions of this Court in Kavery Infrastructure Pvt. Ltd.

v. Delhi Jal Board (decision dated 14th September 2007 in W.P. (C)

No. 5398 of 2007), Saraswati Dynamics (P.) Ltd. v. Union of India

2003 IV AD (Delhi) 225, and the decision of the Madras High Court in

A. Rajendran v. The General Manager, Thermal Power Station I,

Nayveli Lignite Corporation Ltd. (decision dated 16th October 2003 in

W.P. (C) No. 17517 of 2002). Thirdly, it is submitted that no cogent

reasons have been given in the impugned order. Reliance is placed on

the decisions of this Court in Indian Oil Corporation Ltd. v. SPS

Engineering Ltd. 128 (2006) DLT 417 (DB) and Mekaster Trading

Corporation v. Union of India 103 (2003) DLT 573. It is submitted

that mere pendency of a criminal case cannot be a justification for

indefinite blacklisting of the Petitioner. Reliance is placed on the

decision in R.K. Machine Tools Ltd. v. Union of India 2010 III AD

(Del) 191 and the decision dated 26th May 2010 in W.P. (C) No. 1346

of 2010 (TSL Defence Technology P. Ltd. v. Union of India).

Referring to Clause 3.5 of Chapter III of the Defence Procurement

Manual-2006 issued by the MOD, Government of India, Mr. Tiku

submits that the blacklisting had to be for a specified period of time and

further that the decision has to be taken by the appropriate authority

"after due consideration of all the facts and circumstances of the case."

It is submitted that no action was taken for about nine years after filing

of the chargsheet and the CBI suddenly issued a directive in 2005

which led to the impugned order of blacklisting. It is submitted that the

circumstances under which the blacklisting order was passed rendered

it arbitrary and unreasonable. It is submitted that the communication

dated 19th September 2005 wrongly stated that SCL and another sister

company are under trial for forgery/use of end user certificate. In fact

the accused was Mr. Harish Gupta and not SCL. Moreover, SCL was

incorporated only in 1998, two years after the chargesheet was filed

against Mr. Harish Gupta.

7. Mr. Jatan Singh, learned counsel appearing for the Respondents

points out that earlier to the communication from the CBI the MOD

was not aware of the fact that Mr. Harish Gupta was facing criminal

charges. The trial in the said criminal case is in progress. It is at the

stage of prosecution evidence. It is submitted that at the time the said

criminal case was registered Mr. Harish Gupta was carrying on

business in a different name. He submits that as far as the requirement

of compliance of rules of natural justice is concerned, a full fledged

hearing was given to the Petitioner in terms of the order dated 9 th

March 2007 passed by this Court in W. P. (C) No. 1815 of 2007, and,

therefore, this ground is no longer available to the Petitioner. He further

submits that the three companies, i.e., SCL, STPL and STSL were

closely held companies and were promoted by Mr. Harish Gupta and

his wife, son and daughter-in-law. He submitted that in matter of

defence projects national security was of paramount importance. In

view of the doubtful credentials of the owners of SCL and the overall

situation of national security it was decided not to have any business

dealing with SCL, STPL or STSL. He submits that a decision to review

the blacklisting order can be taken only after the criminal case against

Mr. Harish Gupta is concluded.

8. The above submissions have been considered. After the order dated

9th March 2007 was passed by this Court in earlier W.P. (C) No.1815 of

2007 filed by SCL, it has been given a full-fledged hearing. The

impugned order dated 19th April 2007 has been passed thereafter. The

Petitioner can therefore no longer contend that the principles of natural

justice have been violated.

9. The impugned order dated 19th April 2007 is a very detailed one.

This Court is unable to accept the contention of learned counsel for the

Petitioner that it does not contain reasons. The impugned order notes

the fact that the three companies i.e. SCL, STPL and STCL are closely

held companies. Although SCL was incorporated in 1998, Mr. Harish

Gupta was its Director (R&D), his wife looked after the finance

division and his son and daughter-in-law were the Directors. SCL was

working with IB, RAW, Air Force and Signal Intelligence providing

them with solutions for monitoring communication equipment. In

paras 14 and 15 of the impugned order, the following reasons have

been stated:

"14. As the charges against Mr. Harish Gupta, Director and owner of the above firms were forgery of End User Certificate, purportedly to have been issued by NSG, are

extremely serious in nature, the facts could not have been overlooked in the interest of national security. In matters of defence projects and procurements, national security is of paramount importance. Therefore, the Government advised to cease all dealing because of doubtful credentials of the owner/ companies.

15. Keeping in view the facts brought before the Government and the doubtful credential of the owner and firms, and in the overall national security interest as well as the project being of a highly sensitive nature, the Government advisory appears to be in order."

10. Unlike the facts in Mekaster Trading Corporation v. Union of

India and Indian Oil Corporation Ltd. v. SPS Engineering Ltd., it

cannot be said that no reasons have been given in the instant case for

blacklisting the Petitioner. The charge that forgery was committed of

the End User Certificate, purportedly issued by the NSG, is a serious

matter and could not have been overlooked in the interests of national

security. Also, unlike the facts in R. K. Machine Tools and TSL

Defence Technology, the FIR registered in the instant case has

progressed to a criminal trial which is at the stage of prosecution

evidence. Consequently, the reason cited for the MOD for deciding to

stop dealing with SCL cannot be said to be unjustified or arbitrary in

the facts and circumstances of the case.

11. This Court is unable to accept the submission made by Mr. Tiku

that the order dated 9th March 2007 passed by this Court in W. P. (C)

No.1815 of 2007 was not complied with since the Special Secretary

failed to clearly indicate whether she was concurring with the decision

to blacklist the Petitioner. The last sentence of the impugned order

clearly states that "the Government advisory appears to be in order".

12. There also appears to be no substance in the submission that the

blacklisting order is for an indefinite period. The impugned order and

the blacklisting order refer to the fact of the pendency of the criminal

case against Mr. Harish Gupta. In the counter affidavit filed by the

Respondents it is stated in para 3(d) that "the review of whether to have

further dealings with the firms or not can only be taken up after

disposal of pending court case against Shri Harish Gupta." Clearly,

therefore, the blacklisting is not meant to be indefinite. The position is

to be reviewed after the disposal of the pending criminal case against

Mr. Harish Gupta. Consequently, the decisions of this Court in R.K.

Machine Tools Ltd. and TSL Defence Technology P. Ltd. are of no

assistance to the Petitioner.

13. No ground is made out for interference. The writ petition is

dismissed. The pending application is also dismissed.

S. MURALIDHAR, J JANUARY 20, 2011 ak