Satishbhai Viththalbhai Tank vs Gujarat State Road Transport ...
2021 Latest Caselaw 2407 Guj

         C/SCA/3182/2020                                        ORDER




         IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

             R/SPECIAL CIVIL APPLICATION NO. 3182 of 2020

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                SATISHBHAI VITHTHALBHAI TANK
                            Versus
         GUJARAT STATE ROAD TRANSPORT CORPORATION
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Appearance:
MR HARNISH V DARJI(3705) for the Petitioner(s) No. 1
MR.RUCHIR R JOSHI(7241) for the Petitioner(s) No. 1
MR HS MUNSHAW(495) for the Respondent(s) No. 1,2
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 CORAM: HONOURABLE MR. JUSTICE R.M.CHHAYA
        and
        HONOURABLE MR. JUSTICE R.P.DHOLARIA

                                Date : 16/02/2021

                        ORAL ORDER

(PER : HONOURABLE MR. JUSTICE R.M.CHHAYA)

1. Heard Mr. Harnish V. Darji, learned advocate for the petitioner and Mr. H. S. Munshaw, learned advocate for respondents.

2. Petitioner by way of this petition under Article 226 of the Constitution of India has prayed for following relief;

"9(B) To issue appropriate writ, order or direction and to quash and set aside the impugned order no.VNE/AM/TR/COM/J-2347 dated 21/12/2-019, as the same is illegal, arbitrary, perverse and unjust further be pleased to hold the action of cancelling the contract for running canteen - food stall, at Babra control point, S T Depot Amreli, and black listing of petitioner for a period of two years from 01/01/2020, as bad, illegal, arbitrary, perverse and contrary to tender terms and conditions and further be pleased to direct the respondent authority to permit petitioner to run canteen - food Stall at Babra control point, S T Depot, Amreli, as per contract dated 16.10.2017, in the

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interest of justice."

3. It is the case of the petitioner that the contract has been wrongly cancelled. It is further the case of the petitioner that no permanent structure was made by the petitioner and only a temporary structure to provide additional facility to the passengers is made. It is also averred by the petitioner that the security deposit has also been wrongly forfeited by the respondents.

3.1 It is further contended by Mr. Darji, learned advocate for the petitioner that no notice of blacklisting is given and therefore, such order is bad in law.

4. Per contra, Mr. Munshaw, learned advocate appearing for the respondent is relying upon the notice and more particularly, condition Nos. 29 and 30 of the circular and on the aforesaid ground, it was submitted by learned advocate Mr. Munshaw that petition is misconceived and deserves to be dismissed.

5. No other and further submissions are made by learned advocates for the parties.

6. Considering the aspect of cancellation of contract and forfeiting of security deposit, it appears that as per the tender conditions of the contract, the petitioner was given notice on 03.12.2018 and after giving findings of fact, the action of cancellation of contract and forfeiting of security deposit is taken by the respondents and considering the stand taken before this Court, more particularly petitioner in petition and affidavit in rejoinder and respondents in affidavit in reply, it clearly shows the disputed question of facts arise and such disputed question of facts cannot be examined by this Court in its jurisdiction under Article

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226 of the Constitution of India.

6.1 However, we make it clear that petitioner may avail other legal remedy and any observations made in this order would not prejudice the rights of the either party.

6.2 Now coming to the issue of blacklisting as per condition No.49 of the contract and other relevant conditions of the Circular pressed into service by Mr. Munshaw, learned advocate for the respondents, such condition would not give a blanket power to the authority to blacklist the petitioner without being heard or without being given a notice.

7. At this juncture, it would be appropriate to refer the recent judgment by Apex Court in case of UMC Technologies Private Limited vs. Food Corporation of India & Anr. reported in 20202 SCC Online Sc 934. The relevant observations are as under:

"13. At the outset, it must be noted that it is the first principle of civilised jurisprudence that a person against whom any action is sought to be taken or whose right or interests are being affected should be given a reasonable opportunity to defend himself. The basic principle of natural justice is that before adjudication starts, the authority concerned should give to the affected party a notice of the case against him so that he can defend himself. Such notice should be adequate and the grounds necessitating action and the penalty/action proposed should be mentioned specifically and unambiguously. An order travelling beyond the bounds of notice is impermissible and without jurisdiction to that extent. This Court in Nasir Ahmad v. Assistant Custodian General, Evacuee Property, Lucknow and Anr.,1 has held that it is essential for the notice to specify the particular grounds on the basis of which an action is proposed to be taken so as to enable the noticee to answer the case against him. If these conditions are not satisfied, the person cannot be said to have been granted any reasonable opportunity of being heard.

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14. Specifically, in the context of blacklisting of a person or an entity by the state or a state corporation, the requirement of a valid, particularized and unambiguous show cause notice is particularly crucial due to the severe consequences of blacklisting and the stigmatization that accrues to the person/entity being blacklisted. Here, it may be gainful to describe the concept of blacklisting and the graveness of the consequences occasioned by it. Blacklisting has the effect of denying a person or an entity the privileged opportunity of entering into government contracts. This privilege arises because it is the State who is the counterparty in government contracts and as such, every eligible person is to be afforded an equal opportunity to participate in such contracts, without arbitrariness and discrimination. Not only does blacklisting takes away this privilege, it also tarnishes the blacklisted person's reputation and brings the person's character into question. Blacklisting also has long-lasting civil consequences for the future business prospects of the blacklisted person.

15. In the present case as well, the appellant has submitted that serious prejudice has been caused to it due to the Corporation's order of blacklisting as several other government corporations have now terminated their contracts with the appellant and/or prevented the appellant from participating in future tenders even though the impugned blacklisting order was, in fact, limited to the Corporation's Madhya Pradesh regional office. This domino effect, which can effectively lead to the civil death of a person, shows that the consequences of blacklisting travel far beyond the dealings of the blacklisted person with one particular government corporation and in view thereof, this Court has consistently prescribed strict adherence to principles of natural justice whenever an entity is sought to be blacklisted.

16. The severity of the effects of blacklisting and the resultant need for strict observance of the principles of natural justice before passing an order of blacklisting were highlighted by this Court in Erusian Equipment & Chemicals Ltd. v. State of West Bengal2 in the following terms:

"12. ... The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of blacklisting. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be

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supported by legality.

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15. ... The blacklisting order involves civil consequences. It casts a slur. It creates a barrier between the persons blacklisted and the Government in the matter of transactions. The black lists are instruments of coercion.

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20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist."

17. Similarly, this Court in Raghunath Thakur v. State of Bihar,3 struck down an order of blacklisting for future contracts on the ground of non-observance of the principles of natural justice. The relevant extract of the judgement in that case is as follows:

"4. ... [I]t is an implied principle of the rule of law that any order having civil consequences should be passed only after following the principles of natural justice. It has to be realised that blacklisting any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order."

18. This Court in Gorkha Security Services v. Government (NCT of Delhi) and Ors.4 has described blacklisting as being equivalent to the civil death of a person because blacklisting is stigmatic in nature and debars a person from participating in government tenders thereby precluding him from the award of government contracts. It has been held thus:

"16. It is a common case of the parties that the blacklisting has to be preceded by a show-cause notice. Law in this regard is firmly grounded and does not even demand much amplification. The necessity of compliance with the principles of natural justice by

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giving the opportunity to the person against whom action of blacklisting is sought to be taken has a valid and solid rationale behind it. With blacklisting, many civil and/or evil consequences follow. It is described as "civil death" of a person who is foisted with the order of blacklisting. Such an order is stigmatic in nature and debars such a person from participating in government tenders which means precluding him from the award of government contracts."

19. In light of the above decisions, it is clear that a prior show cause notice granting a reasonable opportunity of being heard is an essential element of all administrative decision- making and particularly so in decisions pertaining to blacklisting which entail grave consequences for the entity being blacklisted. In these cases, furnishing of a valid show cause notice is critical and a failure to do so would be fatal to any order of blacklisting pursuant thereto."

8. In the case on hand, except condition No.49, the respondents have no authority to blacklist the petitioner. Mr. Munshaw, learned advocate for the respondents is not in a position to dislodge that no notice is given and therefore, order of blacklisting is passed without any or proper notice and without giving any opportunity of hearing to the petitioner. Following the judgment of Apex Court in case of UMC Technologies Private Limited (Supra), the order of blacklisting deserves to be quashed as the same lacks the basic requirement of notice and hearing. Hence, the order dated 21.12.2019, whereby the petitioner is blacklisted, stands quashed and set aside. Petition is, thus, partly allowed. However, there shall be no order as to costs.

(R.M.CHHAYA, J)

(R.P.DHOLARIA, J) DRASHTI K. SHUKLA