Delhi High Court
Eldyne Electro System Pvt Ltd. And ... vs Union Of India & Ors. on 8 December, 2021
$~36
*IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 08.12.2021
+ W.P.(C) 13025/2021 & CM APPL. 41077/2021, 41693/2021 &
41817/22021
ELDYNE ELECTRO SYSTEM PVT
LTD. AND ANR ..... Petitioners
versus
UNION OF INDIA & ORS. ..... Respondents
Advocates who appeared in this case:
For the Petitioner: Mr. Aman Sinha, Senior Advocate with Mr. Gaurav Gupta,
Mr. Samyak Gangwal and Mr. Hilal Haider, Advocates.
For the Respondent: Mr. Rakesh Mittal with Ms. Yamini Mittal, Advocates for
Railways/R-1 to R-4.
Mr. Mehmood Alam, Director, Vigilance Research Design
and Standard Organisation, Lucknow
CORAM:-
HON'BLE MR. JUSTICE SANJEEV SACHDEVA
JUDGMENT
SANJEEV SACHDEVA, J. (ORAL)
1. It is pointed out by learned counsel for the Respondent that in
order dated 07.12.2021 the designation of the officer who had
produced the sealed cover has been recorded as Director, Research
Design and Standard Organisation, Lucknow whereas it was Mr.
Mehmood Alam, Director, Vigilance Research Design and Standard
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W.P(C) 13025/2021 Digitally Signed 1
By:JUSTICE SANJEEV
Digital Signed By:KUNAL SACHDEVA
MAGGU Signing Date:08.12.2021
Signing Date:09.12.2021 13:06:32 21:13
This file is digitally signed by PS
to HMJ Sanjeev Sachdeva.
Organisation, Lucknow.
2. The order is corrected. Accordingly, in order dated 07.12.2021,
reference to Director, Research Design and Standard Organisation,
Lucknow shall be read as Director, Vigilance Research Design and
Standard Organisation, Lucknow.
3. Arguments were partly heard on 02.12.2021 and on 07.12.2021,
however a formal notice was not issued. Accordingly issue notice.
Notice is accepted by learned counsel appearing for the respondents.
4. With the consent of parties Petition is taken up for final
disposal.
5. Petitioner impugns order dated 08.11.2021 whereby petitioner
has been delisted for the items (i) Multi Section Digital Axle counter
& (ii) Single section digital axle counter.
6. Learned senior counsel appearing for the petitioner contends
that no show cause notice as mandated by the guidelines issued by the
respondent: Research Design and Standard Organisation i.e. QO-D-
8.1-11 ver. 2.0 (hereinafter referred to as the QO-D guidelines) was
issued prior to passing of the delisting order.
7. Learned senior counsel submits that a Temporary Delisting
order was issued on 17.08.2021 which was challenged before the
Calcutta High Court, however the said petition was opposed by the
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By:JUSTICE SANJEEV
Digital Signed By:KUNAL SACHDEVA
MAGGU Signing Date:08.12.2021
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to HMJ Sanjeev Sachdeva.
respondent on the ground of lack of territorial jurisdiction and
petitioner was non suited on the ground of lack of territorial
jurisdiction. He submits that the petitioner has filed an appeal before
the Division Bench of the Calcutta High Court and arguments have
been heard in the appeal and judgment has been reserved.
8. He submits that the subject proceedings are independent of the
Temporary Delisting order as there is a separate provision in the
guidelines dealing with Delisting.
9. Learned senior counsel submits that the impugned order refers
to para 4.2.5 of the QO-D guidelines which do not deal with Delisting
but deals with Banning of Business.
10. Learned senior counsel further contends that respondent No. 4
who has issued the impugned order, does not have the power to ban a
vendor. He further submits that the procedure as prescribed by the
Railway Vigilance Manual particularly para 1026 has not been
followed prior to issuance of the banning order.
11. Learned senior counsel submits that the order of Delisting in
effect amounts to banning the petitioner as the respondents themselves
have referred to clause 4.2.5 and it virtually amounts to a civil death
of the petitioner and as no prior show cause notice or an opportunity
of hearing was granted to the petitioner, same cannot be sustained.
Signature Not Verified
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By:JUSTICE SANJEEV
Digital Signed By:KUNAL SACHDEVA
MAGGU Signing Date:08.12.2021
Signing Date:09.12.2021 13:06:32 21:13
This file is digitally signed by PS
to HMJ Sanjeev Sachdeva.
12. Learned counsel appearing for the respondents has opposed the
petition on four grounds.
13. Learned counsel submits that this Court would not have the
territorial jurisdiction to entertain the subject petition in as much as
the impugned order has been passed by respondent No.4 whose office
is in Lucknow and not in Delhi and the investigation has been
conducted by the Railway Board, Vigilance only in Lucknow and not
in Delhi and no part of cause of action has arisen in Delhi.
14. Second ground raised by learned counsel for the respondent is
that petitioner has already approached the Calcutta High Court, where
admittedly the judgment is reserved by the Division Bench and
accordingly the petition is not maintainable before this Court.
15. Thirdly, it is contended that the petitioner is indulging in forum
shopping as he has approached different Courts and accordingly this
petition will not be maintainable.
16. Fourthly it is contended that the impugned order itself records
that in case petitioner is aggrieved he can file an appeal to the Special
Director General/Vigilance Department and since the order is
appealable this Court should not exercise powers under Article 226 of
the Constitution of India
17. Learned senior counsel for the petitioner disputes the
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By:JUSTICE SANJEEV
Digital Signed By:KUNAL SACHDEVA
MAGGU Signing Date:08.12.2021
Signing Date:09.12.2021 13:06:32 21:13
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to HMJ Sanjeev Sachdeva.
contention that no part of cause of action has arisen in Delhi and
submits that the impugned order itself records that an investigation
was conducted by the Railway Board, Vigilance, which is situated in
Delhi and the impugned order has been passed solely on the basis of
the observations and findings of the Railway Board Vigilance.
18. Learned senior counsel further contends that since the enquiry
and investigation was initiated in Delhi, part of cause of action
accrues in Delhi and accordingly this Court would have the territorial
jurisdiction to entertain the petition.
19. For the purposes of satisfying this Court, with regard to the
territorial jurisdiction, respondents were directed to produce the
investigation report of the Railway Board Vigilance. Said Report was
produced on 07.12.2021 in a sealed cover. The report was perused.
20. Perusal of the report shows that a complaint was received with
the Railway Board, Delhi and the Railway Board, Delhi then directed
an investigation to be conducted by the Railway Board vigilance.
21. Clearly the trigger of the investigation was a complaint which
was received in Delhi and the investigation which was directed to be
conducted by the Railway Board at Delhi.
22. Entire proceedings commenced with the complaint received and
the investigation ordered; both of which happened in Delhi. In view of
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By:JUSTICE SANJEEV
Digital Signed By:KUNAL SACHDEVA
MAGGU Signing Date:08.12.2021
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the same, clearly a part of the cause of action has arisen in Delhi
giving territorial jurisdiction to this Court.
23. Reference may be had to the judgment of the Supreme Court in
Kusum Ingots & Alloys Ltd. vs. Union Of India, (2004) 6 SCC 254
wherein the Supreme Court has held that even if a small part of cause
of action arises within the territorial jurisdiction of the High Court,
that Court will have jurisdiction to entertain a petition.
24. For appreciating the contention of learned counsel for the
respondent with regard to the proceedings pending in Calcutta High
Court and the plea of forum shopping, reference would be required to
be had to the provisions of the QO-D guidelines pertaining to
Temporary Delisting, Delisting and Banning of Business.
25. Admittedly, the first order which was passed by the respondent
on 17.08.2021 was of Temporary Delisting. This order was preceded
by a notice dated 21.04.2021. Notice dated 21.04.2021 required
petitioner to show cause within 30 days, failing which it was stated
that petitioner would be temporarily delisted till such time the legal
requisite agreements were provided.
26. Even though respondents, in the impugned order, have not
referred to the provisions of Temporary Delisting and Delisting (Paras
4.2.2 and 4.2.3) but only to the provision of Banning of Business
(Para 4.2.5), it would be expedient to refer to the same.
Signature Not Verified
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By:JUSTICE SANJEEV
Digital Signed By:KUNAL SACHDEVA
MAGGU Signing Date:08.12.2021
Signing Date:09.12.2021 13:06:32 21:13
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to HMJ Sanjeev Sachdeva.
27. Para 4.2.2 of the QO-D guidelines inter-alia provides as under:-
"4.2.2. TEMPORARY DELISTING
Temporary delisting of vendors can be restored to under
the following conditions:
a) Cases where repeated failures are noticed in the
items supplied
b) Direction from law enforcing agencies
c) If quality audit is refused by the firm or RDSO is
not allowed by the firm to perform quality audit,
the firm shall be temporarily delisted and shall be
removed from the vendor list in the next updation,
till such time quality audit is performed.
d) Expiry of ISO 9001 certificate.
e) Deficiencies/non-functioning of major machinery
& plants affecting the quality.
f) During a course of time, if the specification is
amended and the vendor is not upgrading the
additional requirements within a specified
timeframe.
g) Major deficiencies found during quality
audit/process audit and their non-compliance.
h) The entire factory or part of it is reported
closed/shut down/lock out.
i) If change in the name, address, work place and
ownership not intimated to RDSO within one
month.
j) Any other serious reason.
Signature Not Verified
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By:JUSTICE SANJEEV
Digital Signed By:KUNAL SACHDEVA
MAGGU Signing Date:08.12.2021
Signing Date:09.12.2021 13:06:32 21:13
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to HMJ Sanjeev Sachdeva.
4.2.2.1 Notice and time bound reply
Temporary delisting shall be considered after serving a
notice on the firm seeking time bound reply of 30 days
and considering the response of the firm to the notice.
However, under exceptional circumstances, issue of the
show cause notice shall be dispensed with. The
directorate head shall record the reasons for dispensing
with the show cause notice.
********"
28. Para 4.2.3 provides as under:-
4.2.3 DELISTING
Prerequisites for delisting from 'List of Approved
Vendors' or 'List of RDSO Vendors for developmental
order' posted on RDSO website list directly are
mentioned in para 4.2.1.1. The action of delisting can be
taken considering the seriousness & nature of
deficiencies and its effects on quality of products.
4.2.3.1 Notice and time bound reply
Delisting shall be considered after serving a notice on
the firm seeking time bound reply of 30 days and
considering the response of the firm to the notice...
*********"
29. Perusal of Para 4.2.2 shows that in case of Temporary Delisting
a show cause notice and time bound reply is mandated as per para
4.2.2.1. The proceedings which are subject matter of the Calcutta
High Court are with regard to Temporary Delisting order issued under
Para 4.2.2.
Signature Not Verified
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By:JUSTICE SANJEEV
Digital Signed By:KUNAL SACHDEVA
MAGGU Signing Date:08.12.2021
Signing Date:09.12.2021 13:06:32 21:13
This file is digitally signed by PS
to HMJ Sanjeev Sachdeva.
30. Para 4.2.3, which pertains to Delisting and not Temporary
Delisting, also mandates issuance of a notice under Para 4.2.3.1. This
clearly shows that the action of Temporary Delisting and the action of
Delisting are two distinct actions.
31. A comparison of Para 4.2.2.1 and 4.2.3.1 shows that under Para
4.2.2.1 there is a power of dispensation of the show cause notice, in
exceptional circumstances which show cause notice can be dispensed
with, for reasons to be recorded. However there is no such power of
dispensation of show cause notice in the case of Delisting.
32. The maximum period of Temporary Delisting is one year
whereas in the case of Delisting the minimum period is one year.
33. Since, the consequences of Delisting are far more serious and
graver than the consequences of Temporary Delisting, the power of
dispensing with the show cause notice has not been provided.
34. This of course is without prejudice to the submission of learned
Senior Counsel for the petitioner that in the impugned order, there is
no reference to the order of Temporary Delisting that is subject matter
of challenge before the Calcutta High Court or even reference to the
provisions of Temporary Delisting or Delisting i.e. Paras 4.2.2 or
4.2.3.
35. As Respondents, in the impugned order, have referred to Para
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By:JUSTICE SANJEEV
Digital Signed By:KUNAL SACHDEVA
MAGGU Signing Date:08.12.2021
Signing Date:09.12.2021 13:06:32 21:13
This file is digitally signed by PS
to HMJ Sanjeev Sachdeva.
4.2.5 of the QO-D guidelines the same is extracted hereunder:-
"4.2.5 BANNING OF BUSINESS
i) The vendor is black listed/or business dealing is
banned by Govt. of India or its offices on communication
by Railway Board, in such cases, no show cause notice to
the firm is required before delisting.
ii) Whenever proposal for banning of business is sent
to board the firm should be DELISTED without
mentioning the word permanent delisting/temporary
delisting."
36. Para 4.2.5 is in two parts. Para 4.2.5 (i) comes into play where a
vendor is black listed or business dealing is banned by Government of
India or its offices, on communication by Railway Board, in which
case no show cause notice is required to be issued to the firm before
Delisting.
37. Sub Para (ii) of Para 4.2.5 stipulates that where proposal for
banning of business is sent to the Railway Board the firm is to be
delisted without mentioning the word "permanent delisting or
temporary delisting".
38. Learned counsel for the respondent under instructions from Mr.
Mehmood Alam, Director, Vigilance, Research Design and Standard
Organisation, Lucknow, submits that the no communication has been
sent by the Railway Board to the Government of India or its offices
for black listing or banning of business with the petitioner. Further, as
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By:JUSTICE SANJEEV
Digital Signed By:KUNAL SACHDEVA
MAGGU Signing Date:08.12.2021
Signing Date:09.12.2021 13:06:32 21:13
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to HMJ Sanjeev Sachdeva.
per his instructions there is no order communicated to them by
Government of India or its offices of banning of business or black
listing the petitioner, on a communication by the Railway Board. He
further submits that the impugned order is an order only of delisting of
two products of the petitioner and not of Banning of Business.
39. Since, the case of the Respondents is that the impugned order is
not an order of Banning of Business, reference, in the impugned order,
to Para 4.2.5, appears to have been made to overcome the requirement
of issuance of a show cause notice as is mandated by Para 4.3.2.1.
40. Admittedly, in the present case no show cause notice has been
issued to the petitioner for Delisting other than the one referred to
above, which was for Temporary Delisting.
41. It may further be noticed that the Indian Railways Vigilance
Manual, 2008 in Para 1026 provides for an elaborate procedure to be
followed in the Railway Board's office for suspension/banning of
business.
42. It is not the case of the respondents that the procedure as
prescribed under para 1026 of the Indian Railways Vigilance Manual
has been followed prior to issuance of the impugned order. Even the
impugned order does not refer to having followed the procedure
prescribed under Para 1026 of the Indian Railways Vigilance Manual.
Signature Not Verified
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By:JUSTICE SANJEEV
Digital Signed By:KUNAL SACHDEVA
MAGGU Signing Date:08.12.2021
Signing Date:09.12.2021 13:06:32 21:13
This file is digitally signed by PS
to HMJ Sanjeev Sachdeva.
43. The impugned order extracts the observations and findings of
the Railway Board Vigilance and states that the said observations and
findings have been re-examined by the competent authority prior to
issuance of the impugned order.
44. Clearly, the observations and findings of the Railway Board
Vigilance is an input based on which the competent authority has
issued the impugned order.
45. The observations and findings of the Railway Board Vigilance
do not satisfy the requirement of (i) an order of the Government of
India or its offices, on communication by Railway Board, of black
listed or banning business dealing or (ii) proposal for banning of
business sent to the Railway Board so as to attract the provisions of
Para 4.2.5 and warrant an action of Delisting without complying with
the requirement of a show cause notice as mandated by Para 4.2.3.1.
46. Even the impugned order does not refer to the earlier temporary
delisting. The impugned order of Delisting does not state that the said
order is consequential to the earlier order of Temporary Delisting.
Further, the provisions of Para 4.2.3 do not stipulate that Delisting
will automatically come into force in case of a Temporary Delisting.
47. Further, the action of Temporary Delisting and the impugned
order of Delisting are two distinct actions emanating from distinct
provisions and give rise to distinct causes of action entitling an entity
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By:JUSTICE SANJEEV
Digital Signed By:KUNAL SACHDEVA
MAGGU Signing Date:08.12.2021
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to challenge them in independent proceedings.
48. It may also be noted that the objection raised by the
Respondents to the Petitioner approaching the Calcutta High Court, is
that Calcutta High Court lacks territorial jurisdiction. The Writ
Petition challenging the Temporary Delisting has been rejected on the
ground of lack of territorial jurisdiction and an appeal is pending
before the Division Bench.
49. This court clearly would have the jurisdiction to entertain this
petition as the two actions are distinct and in terms of Article 226 (2)
of the Constitution of India because a part of the cause of action has
arisen within the territory to which this Court exercises jurisdiction.
50. Accordingly, I find no merit in the objection raised by learned
counsel for the respondent that this petition should not be entertained
because petitioner is allegedly indulging in forum shopping or that
petitioner has already approached the Calcutta High Court impugning
the order dated 17.08.2021 of Temporary Delisting.
51. It is an admitted position that no show cause notice has been
issued to the petitioner prior to passing of the impugned order dated
08.11.2021.
52. Para 4.2.3.1 mandates issuance of a show cause notice prior to
an order of Delisting. As noticed hereinabove the comparison of
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By:JUSTICE SANJEEV
Digital Signed By:KUNAL SACHDEVA
MAGGU Signing Date:08.12.2021
Signing Date:09.12.2021 13:06:32 21:13
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to HMJ Sanjeev Sachdeva.
clause 4.2.2.1 and 4.2.3.1 shows that there is no exemption, under any
circumstances, from issuance of a show cause notice prior to passing
of an order of Delisting. Furthermore, Para 1026 of the Railway
Vigilance Manual also mandates issuance of a show cause notice prior
to issuing a black listing order.
53. The order of delisting of a registered contractor in effect
amounts to banning of business with the said entity for the reasons
that once a contractor is delisted, he would not be in a position to do
business with the said entity which has delisted the vendor.
54. It is also settled position of law that prior to issuance of any
black listing or banning order a show cause notice is mandatory. In
UMC Technologies (P) Ltd. v. Food Corporation of India, (2021) 2
SCC 551 the Supreme Court has held that not only black listing but
even where there is down grading of a contractor, a show cause notice
is mandatory. Further, the Supreme Court has held that a person
against whom any action is sought to be taken or whose rights or
interests are being affected should be given a reasonable opportunity
to defend himself.
55. In the instant case, because a reasonable opportunity to defend
or render an explanation has not been given to the petitioner, the
impugned action of Delisting cannot be sustained as the same is
contrary to the provisions of the QO-D guidelines as well as the
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By:JUSTICE SANJEEV
Digital Signed By:KUNAL SACHDEVA
MAGGU Signing Date:08.12.2021
Signing Date:09.12.2021 13:06:32 21:13
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Railway Vigilance Manual.
56. The objection raised by learned counsel for the respondent with
regard to existence of an alternative remedy of an appeal also does not
have any merit. It may be noted that mere existence of an alternative
remedy does not oust the jurisdiction of a High Court under Article
226 of the Constitution of India1.
57. No doubt this Court, would normally not exercise jurisdiction if
there is an alternative remedy but where, ex facie, the impugned order
is issued contrary to the guidelines of the respondents and also in
violation of the principles of natural justice, this is a fit case where
powers under Article 226 of the Constitution of India should be
exercised.
58. It may further be noted that there is no remedy of appeal
provided by the QO-D guidelines against an order passed under Para
4.2.5 or 4.2.3 and mere mentioning in the impugned order that
Petitioner can file an appeal against the order would not create the
remedy of a right of an appeal.
59. In view of the above, the impugned order dated 08.11.2021,
Delisting the Petitioner, cannot be sustained and is accordingly
quashed.
Whirlpool Corporation v. Registrar of Trade Marks Mumbai (1998) 8 SCC 1
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By:JUSTICE SANJEEV
Digital Signed By:KUNAL SACHDEVA
MAGGU Signing Date:08.12.2021
Signing Date:09.12.2021 13:06:32 21:13
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to HMJ Sanjeev Sachdeva.
60. It is however, clarified that this Court has neither considered
nor commented upon the merits of the action of the respondents or the
defence of the petitioner to the said action. It would be open to the
respondents to initiate a fresh action, in accordance with law, after
giving a show cause notice and complying with the principles of
natural justice.
61. Petition is allowed in the above terms.
62. Order Dasti under the signatures of the Court Master.
SANJEEV SACHDEVA, J.
DECEMBER 08, 2021/rk
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By:JUSTICE SANJEEV
Digital Signed By:KUNAL SACHDEVA
MAGGU Signing Date:08.12.2021
Signing Date:09.12.2021 13:06:32 21:13
This file is digitally signed by PS
to HMJ Sanjeev Sachdeva.
