Kunal Kamalsinh Tomar vs State Of Gujarat
2021 Latest Caselaw 2408 Guj

        C/SCA/2694/2019                                   ORDER




         IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

          R/SPECIAL CIVIL APPLICATION NO. 2694 of 2019

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                          KUNAL KAMALSINH TOMAR
                                  Versus
                            STATE OF GUJARAT
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Appearance:
MR MAULIN G PANDYA(3999) for the Petitioner(s) No. 1
AISHVARYA(8018) for the Respondent(s) No. 2,3
DELETED(20) for the Respondent(s) No. 4
MR TIRTHRAJ PANDYA, ASST. GOVERNMENT PLEADER(1) for the
Respondent(s) No. 1,2,3
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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. Zubin Bharda, learned advocate for Mr. Maulin G. Pandya, learned advocate for the petitioner, Mr. Tirthraj Pandya, learned AGP for respondent No.1 and Ms. Aishvarya Gupta, learned advocate for respondent Nos. 2 and 3.

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

"7(B) Your Lordship may be pleased to issue a writ of mandamus and / or any other appropriate writ order or direction quashing and setting aside the impugned order dated 22.11.2018 passed by the respondent no.2."

3. The main contention raised in this petition is to the effect

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that the order dated 22.11.2018 is passed without giving proper notice to the petitioner. It is specifically averred by the petitioner that the notice was given for taking action against petitioner but the drastic action of blacklisting has been taken against the petitioner. Pursuant to the notice by this Court, respondent has filed reply and petitioner has filed rejoinder.

4. At this juncture, it would be appropriate to refer the record, which indicates that the first notice was issued on 28.09.2018 stating that the goods as per the contract have not been lifted by the petitioner and hence action will be taken. Thereafter, by another notice dated 01.11.2018 was given asking the petitioner to render his explanation within 7 days. Thereafter, a further notice dated 05.11.2008 was given. All these notices culminated in the impugned order was dated 05.11.2018. It would be appropriate to note at this stage that item No.5 in the impugned order refers to the said three notices. However, in none of the notices, there is mention about blacklisting.

5. It would be appropriate to refer to recent judgment of Apex Court in case of UMC Technologies Private Limited vs. Food Corporation of India & Anr. reported in 20202 SCC Online Sc 934 has observed 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.

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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.

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

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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 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

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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 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."

6. During the course of hearing before this Court, Ms. Aishvarya Gupta, learned advocate appearing for the concerned respondents was asked to take instructions. She has placed on record a communication dated 12.02.2021, wherein it is mentioned that the petitioner is at liberty to file an appeal and the delay would be condoned.

7. On bare perusal of impugned order dated 22.11.2018, it clearly transpired that for the alleged breach of condition Nos. 3 and 5 of the contract, the contract has been cancelled and the security deposit is forfeited and over and above, the petitioner has been blacklisted permanently. For revocation of contract as well as forfeiture of the security, it would be appropriate for the appellant to prefer an appeal before the General Manager as per the condition 11 of the contract. If such appeal is filed latest by

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01.03.2021, the same shall be dealt with by the appellate authority on merits and would not be disposed of only on the ground of limitation.

7.1 However, as far as blacklisting is concerned, the said order is hereby quashed and set aside following the ratio laiddown by Apex Court in case of UMC Technologies Private Limited (Supra) as no notice was given to the petitioner. It would be appropriate for the respondent to issue fresh notice essentially for blacklisting and opportunity of fresh hearing be given to the petitioner before passing any order.

7.2 Petition is disposed of accordingly. Direct service is permitted. However, there shall be no order as to costs.

8. In view of disposal of main petition, Civil Application does not survive and the same stands disposed of accordingly.

(R.M.CHHAYA, J)

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