Roshan Lal Vohra And Sons And ... vs Mcd And Others
2011 Latest Caselaw 1458 Del

*       IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                          Judgment Delivered on: March 14, 2011

+              LPA No. 778/2010 and WP(C) No.7860/2010

        ROSHAN LAL VOHRA & SONS & ORS           ..... Appellant
                    Through: Mr.Shyam Moorjhani and
                             Mr.Siddharth Joshi, Advocates

                       versus


       MCD & ORS                                                 ..... Respondents

                                Through:     Mr.H.S.Phoolka, Sr. Advocate with
                                             Mr.Jitender Kumar and Mr.Kanwar
                                             Faisal, Advocates for MCD.


       CORAM:
       HON'BLE THE CHIEF JUSTICE
       HON'BLE MR. JUSTICE SANJIV KHANNA

1.     Whether reporters of the local papers be allowed to
       see the judgment?                                                 Yes
2.     To be referred to the Reporter or not?                            Yes
3.     Whether the judgment should be reported in the Digest?            Yes


DIPAK MISRA, CJ

The controversy involved in the Letters Patent Appeal and the writ

petition preferred under Article 226 of the Constitution of India being

relatable to the same parties and regard being had to the inescapable impact

they will have on each other, the matters were heard analogously and are

disposed of by a singular order.

2. Be it noted, when WP(C) No.7860/2010 was listed before the learned

Single Judge on 25.11.2010 keeping in view the assail made in the earlier

LPA 778/2010 & WP(C) No.7860/2010 page 1 of 14 order, which had relevance, in LPA 778/2010, the learned Single Judge

thought it appropriate to refer the matter to the Division Bench to be linked

with the Letters Patent Appeal.

3. To appreciate the lis in question, it is imperative to sit in a time

machine to appreciate the number of litigations that have been filed before

this Court and the consequences and the effect of the same. The appellant

and others had entered into a contract with the Municipal Corporation of

Delhi (MCD) and due to certain reasons an order was passed blacklisting the

firm and the said order was challenged in WP(C) No. 8130/2009. Though

contentions were raised with regard to the various facets relating to the

promptitude in which the contractor had carried on the work, the non-

justification of issuance of any kind of order like black listing, the high

handed attitude exhibited by the owner, the non-supply of revised drawings

and designs and obstructions at the site and the non-fixation of the revised

rate and certain other ancillary factors, the learned Single Judge thought it

appropriate not to enter into the said arena by expressing the view that it

involved factual dispute and refrained himself from deciding the same.

However, as far as the black listing is concerned, in paragraph 39 of the

order, the learned Judge opined that as the order of black listing has been

passed without following the principles of natural justice, and hence, the

same deserved to be lanceted in view of the decisions rendered in M/s

Erusion Equipment and Chemicals etc. Ltvs. V. State of West Bengal; AIR

1975 Supreme Court 266 and National Building Construction Corporation

Limited v. New Delhi Municipal Council; 2007 (2) R.A.J. 162 (Del).

LPA 778/2010 & WP(C) No.7860/2010 page 2 of 14 Eventually, the learned Single Judge opined thus:

" In the facts and circumstances of this case as observed earlier, it is not possible for this Court in the proceedings under Article 226 of the Constitution of India to decide dispute questions of fact and the dispute arises out of a contract entered into between the parties. Thus, no relief can be granted to the petitioners with respect to two orders passed on 16.3.2009. It will be open to the petitioners to seek such remedies, as may be available to them in accordance with law. It is clarified that any observations made by this Court shall not come in the way of the petitioners in seeking appropriate remedy."

4. After the aforesaid order came to be passed, the appellant preferred

WP(C) No.5785/2010 for issue of a writ of mandamus to have the access to

e-tenders as he has been deprived of the said benefit. On that juncture, the

learned Single Judge while dealing with the writ petition came to hold that

as no notice to show cause was given after the order of blacklisting was

axed, a contention was advanced by the MCD that pending action it has the

jurisdiction/authority to suspend awaiting decision on the show cause notice.

The learned Single Judge took note of the fact that no show cause notice had

been issued and no order of suspension had been passed. It is worth noting,

a contention was advanced by the appellant that neither the show cause

notice could be issued nor can an order of suspension be passed as such a

power did not rest with the authority. Under these circumstances, the

learned Single Judge disposed of the writ petition with the following

directions:

" In view of the aforesaid circumstances, this petition is disposed of with direction that unless there is an order of suspension i.e. of interim

LPA 778/2010 & WP(C) No.7860/2010 page 3 of 14 blacklisting of the petitioner on or before 15th September, 2010, the respondent No.1 MCD to give access to the petitioner to the tenders and allow him to participate in the same with effect from 16th September, 2010. Needless to state that the petitioner shall have remedies against the order, if any, of suspension and/ or if the show cause notice now given results in fresh blacklisting."

5. As the factual chronology would reveal, thereafter the MCD issued a

notice on 13th September, 2010 requiring the appellant to show cause why

the appellant firm be not debarred from tendering in MCD for an appropriate

period for not following the terms and conditions of the NIT/Work

Order/Contract.

6. After the issuance of the notice to the appellant, vide order dated

15.9.2010 an order was passed suspending the appellant for a period of six

months pending appeal. At this juncture, the appellant moved this Court in

Contempt Case No.653/2010. It was put forth before the learned Single

Judge that after quashment of the order of black listing, the issuance of

notice to show cause did amount to contempt of this Court. The learned

Single Judge declined to initiate the proceedings for contempt by ascribing

following reasons:

".... By filing W.P.(C) No.8130/2009 the petitioners had challenged various orders passed by the MCD including the order of blacklisting.

While disposing of the writ petition the order of blacklisting was quashed only on the ground that the respondent MCD had failed to comply with the principles of natural justice and no show cause notice, as to why the petitioners should not be blacklisted, was issued to the petitioners. Issuance of show cause notice to the petitioners does not amount to willful disobedience of any order or

LPA 778/2010 & WP(C) No.7860/2010 page 4 of 14 direction issued by this Court in the judgment dated 1.7.2010. Accordingly, no grounds are made out for initiating contempt proceedings in the present contempt petition."

7. It is apposite to mention that liberty was granted to the petitioner to

assail the show cause notice and the order of suspension in accordance with

law. After the proceeding for contempt was dropped, WP(C) No.6718/2010

was filed. It has been urged in the writ petition and propounded in the

course of arguments that when the order of blacklisting had been dropped by

order dated 1st July, 2010, in the earlier petition, the respondents had no

authority in law to proceed for blacklisting and suspend the business of the

appellant, and secondly the show cause notice dated 13 th September, 2010

had not been issued by the appropriate authority.

8. The learned Single Judge referred to the earlier order and opined that

when the order of blacklisting was passed solely on the ground that

principles of natural justice was not complied with, it is open to the MCD to

proceed with the blacklisting proceedings and the permission or leave from

this Court was not necessary. As far as the second contention is concerned,

the learned Single Judge opined that the appellant-petitioner can raise all the

contentions in the show cause before the competent authority including the

ground that it had not been given by the competent authority.

9. The said order is impugned in this Letters Patent Appeal. When the

Letters Patent Appeal was pending, a second show cause notice was issued

by the Enlistment Committee of the MCD on 2.11.2010. It was mentioned

therein that the Enlistment Committee has concurred with the orders of the

LPA 778/2010 & WP(C) No.7860/2010 page 5 of 14 Commissioner MCD dated 14.9.2010 issued vide circular dated 15.9.2010

suspending the business of the petitioner with the MCD for a period of six

months. The said show cause notice was challenged in WP(C)

No.7860/2010 which the learned Single Judge thought it appropriate to be

heard by a Division Bench along with the appeal.

10. Questioning the correctness and legal propriety of the order passed in

WP(C) No. 6718/2010, holding the issuance of the notice to show cause and

the order of suspension passed by the respondent to be correct and further

the order passed in WP(C) No. 8130/2009, Mr. Shyam Moorjhani, learned

counsel for the appellant, has raised the following contentions:

(a) When the learned Single Judge had quashed the order of

blacklisting and no liberty was granted, the MCD and its

functionaries could not have issued the show cause notice.

(b) The language employed in the show cause notice would clearly

reflect the pre-determined mind of the respondent to blacklist

the appellant and, therefore, the principle of audi alteram

partem is fundamentally an exercise in futility.

(c) The first show cause notice and order was passed in the name of

the Commissioner and, therefore, no second show cause notice

could have been issued by the Committee in question.

(d) The show cause notice issued by the respondent is in the realm

of jurisdictional fact and, therefore, the same deserves to be

quashed and more so when there is a pre-disposition of mind.

LPA 778/2010 & WP(C) No.7860/2010 page 6 of 14 Mr.Moorjhani to bolster his submissions has commended us to the

decision in Siemens Ltd. v. State of Maharashtra; (2006) 12 Supreme Court

Cases 33.

11. Mr.H.S.Phoolka, learned senior counsel for the MCD, resisting the

aforesaid contentions has proponed thus:

(i) When any order which is likely to visit adverse consequences is

quashed on the ground of non-compliance of principles of

natural justice, the Court issues a writ of certiorari for quashing

the said order and the parties get relegated to their original

position and, therefore, the question of obtaining any liberty or

grant of liberty does not arise.

(ii) The initial show cause notice was issued by the Commissioner

though it is the Committee which has the power of issuance of

show cause notice as well as the suspension order under the

relevant instructions and, therefore, the defects were rectified

and it is within the domain of the authority to rectify the defects

and hence, the action taken cannot be faulted.

(iii) The contention that once the show cause notice is issued the

hands of the respondent are tied is unacceptable since it relates

to realm of contract and specially the participation of the

Contractor in the tendering process and, therefore, the MCD is

not debarred in law to issue/correct/rectify the another show

cause notice.

       (iv)    The decision in Siemens Ltd. (Supra) is distinguishable

LPA 778/2010 & WP(C) No.7860/2010                                   page 7 of 14

inasmuch as the Apex Court was dealing with the jurisdictional

fact and that an absolute prior premeditation and hence opined,

the doctrine of audi alteram partem herein is unwarranted but

the said principle is not applicable to the case at hand inasmuch

as the factual bed rock which constitutes the jurisdictional fact

pertains to violation of terms and conditions of the

contract/agreement and adequate opportunity would be afforded

to the petitioner to explain the same and, therefore, it cannot be

held that the respondents have made up their mind. In any case,

whether there has been violation of contractual terms and

conditions or not should not to be decided in a writ petition or

an appeal arising out of a writ petition since the said

determination first lies within the domain of the authority and

more so when the disputed questions of facts are involved.

12. To buttress his submissions, the learned senior counsel has drawn

inspiration from the decisions rendered in: Canara bank and Ors. v. Shri

Debasis Das and Ors. JT 2003 (3) SC 183; Union of India and Others v.

B.N.Jha, JT 2003 (3) SC 201; Uma Nath Pandey and Ors. V. State of U.P.

and Anr., JT 2009 (4) SC 121; and Gurmej Singh v. Sate of Punjab & Anr.,

JT 2009 (13) SC 684.

13. First we shall advert to the contention whether the liberty was

required to be granted. On a perusal of the order passed by the learned

Single Judge on the first occasion, it is quite clear that the learned Single

LPA 778/2010 & WP(C) No.7860/2010 page 8 of 14 Judge had quashed the order primarily on the ground that there has been

non-compliance of principles of natural justice. While quashing the order,

the learned Single Judge has referred to the factual scenario and declined to

adjudicate the controversy relating to the contract and in paragraph 45 of the

order has clearly observed that if any observations have been made they will

not affect the case with regard to the contractual dispute. Thus, it is clear as

crystal that the whole thing rests on the violation of the audi alteram partem.

14. In the case of Debasis Dass & Ors. (Supra), the Apex Court held that

whenever an order is struck down as invalid, being in violation of principles

of natural justice, there is no final decision of the case and fresh proceedings

are left open. All that is done is to vacate the order assailed by virtue of its

inherent defect, but the proceedings are not terminated. While dealing with

the concept of useless formality, their Lordships have held thus:

"23. As was observed by this Court we need not go into „useless formality theory‟ in detail; in view of the fact that no prejudice has been shown. As is rightly pointed out by learned counsel for the appellants unless failure of justice is occasioned or that it would not be in public interest to dismiss a petition on the fact situation of a case this Court may refuse to exercise said jurisdiction ( Gadde Venkateswara Rao v. Govt. of A.P. and Ors.; 1966 (2) SCR 172). It is to be noted that legal formulations cannot be divorced from the fact situation of the case. Personal hearing was granted by the Appellate Authority, though not statutorily prescribed. In a given case post-decisional hearing can obliterate the procedural deficiency of a pre- decisional hearing (Charan Lal Sahu v. Union of India etc.; JT 1989 (4) SC 582: AIR 1990 SC 1480)."

15. In the case of Uma Nath Pandey and Ors.(Supra), the principles laid

LPA 778/2010 & WP(C) No.7860/2010 page 9 of 14 down in the case of Debasis & Ors.(Supra) were reiterated. In Gurmej

Singh (Supra), the Apex Court reiterated the aforesaid principle and the

applicability of natural justice in this context and the action to be taken when

such an order is passed.

16. At this juncture, we may refer to the decision in Siemens Ltd. (supra)

on which Mr.Moorjhani has placed a heavy reliance. The learned counsel

has drawn our attention to paragraphs 8 to 11. In the said case, their

lordships expressed the view that when a demand is made forming the same

as a show cause notice and there is absence of jurisdictional fact for issuance

of the said notice, a writ petition would be maintainable. In that context in

paragraphs 9 and 11 it has been held thus:

" 9. Although ordinarily a writ court may not exercise its discretionary jurisdiction in entertaining a writ petition questioning a notice to show cause unless the same inter alia appears to have been without jurisdiction as has been held by this Court in some decisions including State of U.P. v. Brahm Datt Sharma, (1987) 2 SCC 179: (1987) 3 ATC 319: AIR 1987 SC 943, Special Director v. Mohd. Ghulam Ghouse; (2004) 3 SCC 440: 2004 SCC (Cri) 826, and Union of India v. Kunisetty Stayanarayana; (2006) 12 SCC 28: (2006) 12 Scale 262, but the question herein has to be considered from a different angle viz. when a notice is issued with premeditation, a writ petition would be maintainable. In such an event, even if the court directs the statutory authority to hear the matter afresh, ordinarily such hearing would not yield any fruitful purpose(K.I. Shephard v. Union of India; (1987) 4 SCC 431: 1987 SCC (L& S) 438: AIR 1988 SCC 686. It is evident in the instant case that the respondent has clearly made up its mind. It explicitly said so both in the counter-affidavit as also in its purported show- cause notice.

...

LPA 778/2010 & WP(C) No.7860/2010 page 10 of 14

11. A bare perusal of the order impugned before the High Court as also the statements made before us in the counter-affidavit filed by the respondents, we are satisfied that the statutory authority has already applied its mind and has formed an opinion as regards the liability or otherwise of the appellant. If in passing the order the respondent has already determined the liability of the appellant and the only question which remains for its consideration is quantification thereof, the same does not remain in the realm of a show-cause notice. The writ petition, in our opinion, was maintainable."

17. After so stating, the Apex Court remitted the matter to the High Court

for consideration on its own merits. Thus, it means that the show cause

notice shall be treated as a demand and the matter was remitted to the High

Court to adjudicate whether the demand was adequately raised. In the

peculiar facts, their Lordships did not think it appropriate to quash the show

cause notice and directed the matter to be reconsidered by the competent

authority as the liability had already been fulfilled. But in the case at hand,

the factum of the matter is whether the appellant deserves to be blacklisted.

The learned Single Judge, on the first occasion, had referred to the terms of

the contract determining the contract and eventually the communication

made between the parties and eventually refrained from deciding the

disputed question of fact as the dispute arises out of a contract entered into

between the parties. The Court had not quashed the order of blacklisting on

merits.

18. At this juncture, this Court should not assume that an order would be

passed and how they shall be dealt with at the stage of initiation and more so

when on the earlier occasion, the Court had quashed the order of blacklisting

LPA 778/2010 & WP(C) No.7860/2010 page 11 of 14 on merits and the said order had been challenged from both the sides.

19. In view of our aforesaid analysis, the contention requiring the

respondent to afford an opportunity of hearing to the petitioner before

proceeding to the blacklisting is in the realm of useless theory of formality

where it does not arise. Hence, we do not dwell upon the said issue. The

next aspect that is highlighted by Mr.Moorjhani, learned counsel for the

appellant, that once a notice to show cause had been issued, the same could

not have been substituted by the second show cause notice. It has been also

urged by him that the second show cause notice issued by the Committee is

an eye-wash as the Committee could not have differed from the decision

taken by the Commissioner. On this, Mr.Phoolka has drawn our attention to

the instructions.

20. Be it noted, the show cause notice is relatable to black listing as well

as suspension of business. Instruction 23.2 on which reliance has been

placed upon, reads as follows:

" 23.2 Suspension of business :- The enlistment authority may suspend business with a contractor for indefinite period or for a period as decided by enlisting authority, pending full enquiry into the allegation, if the enlistment authority is prima facie of the view that the contractor is guilty of an offence in relation to business dealings which, when established would result in his removal/banning business and it is not considered desirable to entrust new works or continue business with the contractor."

21. It is not in dispute that the first show cause notice was issued under

the authority of the Commissioner/Corporation. To rectify the same, the

Committee issued the second show cause notice to which an objection was

LPA 778/2010 & WP(C) No.7860/2010 page 12 of 14 raised by the petitioner to regularise the same or to bring it in consonance

with the instructions. On the second show cause notice so issued, it is

submitted by Mr.Phoolka, relying on the decision in Maharashtra State

Seeds Corpn. Ltd. v. Hariprasad Drupadrao Jadhao & Anr.; (2006) 3

Supreme Court Cases 690, that in an administrative proceeding if there is a

defective notice then it can be rectified. Learned senior counsel would

submit that it is not such a mistake which cannot be rectified and, on the

contrary, the mistake deserved to be rectified to take appropriate action as

required under law.

22. In our considered opinion, the MCD had the authority to rectify the

mistake by issuing the show cause notice through the Committee in terms of

the instructions of which the parties were aware at the time of entering into

agreement. It will be extremely harsh to say that once a show cause notice

had been issued by the Commissioner or any authority on behalf of the

Commissioner, the Corporation as a body corporate will become functus

officio. In the absence of lack of inherent jurisdiction we are unable to

acceed to such a submission and, accordingly, we fail to repeal the same. As

far as the disagreement of the Committee with the Commissioner is

concerned, in the scheme of things the Committee has taken a decision and

there cannot be a presumption that it will be guided, influenced, persuaded

or commended by the Commissioner. That apart, thus, the said submission

also does not gain any acceptation.

23. In view of the aforesaid, we are not inclined to interfere with the LPA

778/2000 as well as the WP(C) No.7860/2010. However, we extend the

LPA 778/2010 & WP(C) No.7860/2010 page 13 of 14 period to file reply to the second show cause notice dated 2 nd November,

2010 within a period of four weeks and the Committee shall afford an

adequate opportunity of personal hearing to the petitioner as he has to

protect himself from vesting of adversible consequences.

24. We further hasten to clarify that none of our observations would be

taken up as an aid at any juncture for the simon pure reason that we have not

referred to the contractual implications as the same has to be adjudicated, if

necessity so warrants, by a different forum.

25. In the result, the appeal and the writ petition are dismissed with no

order as to costs.

CHIEF JUSTICE

SANJIV KHANNA, J MARCH 14, 2011 sv

LPA 778/2010 & WP(C) No.7860/2010 page 14 of 14