Gujarat High Court
Smile Please Digital Lab. Private ... vs The Collector on 17 March, 2021
Bench: R.M.Chhaya
C/SCA/861/2020 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 861 of 2020
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE R.M.CHHAYA
and
HONOURABLE MR. JUSTICE R.P.DHOLARIA
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or any
order made thereunder ?
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SMILE PLEASE DIGITAL LAB. PRIVATE LIMITED
Versus
THE COLLECTOR
==========================================================
Appearance:
MR BHARAT S PATEL, SENIOR ADVOCATE assisted by MR CHIRAG B
PATEL(3679) for the Petitioner(s) No. 1,2
MS DHWANI TRIPATHI, ASSISTANT GOVERNMENT PLEADER for the
Respondent(s) No. 1
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CORAM: HONOURABLE MR. JUSTICE R.M.CHHAYA
and
HONOURABLE MR. JUSTICE R.P.DHOLARIA
Date : 17/03/2021
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE R.M.CHHAYA)
C/SCA/861/2020 JUDGMENT
1. Heard Mr. Bharat S. Patel, learned Senior
Advocate assisted by Mr. Chirag B. Patel,
learned advocate for the petitioners and Ms.
Dhwani Tripathi, learned Assistant Government
Pleader for the respondent.
2. By way of this petition under Article 226 of
the Constitution of India, the petitioners
have challenged the order dated 5.12.2019
passed by the respondent authority, whereby
the petitioner came to be blacklisted for a
period of 3 years i.e. from 5.12.2019 to
4.12.2022. As a matter of record, the present
petition is filed on 10.1.2020.
3. Following facts emerge from the record of the
petition:
Facts reveal that the petitioners deal with
the human resources. The respondent authority
floated a tender for running Janseva Kendra
and eDhara Kendra as PartA and PartB
category respectively. The petitioners made an
offer along with other offerers. The record
indicates that the offer given by the
petitioners was accepted as being lowest and
accordingly, a working order was issued to the
petitioners on 1.1.2018. Record further shows
that pursuant to the work order, an agreement
was executed between the petitioners and the
respondent authority on 23.1.2018 with a
C/SCA/861/2020 JUDGMENT
validity period of one year i.e. upto
22.1.2019. It is also a matter of record that
the agreement was extended firstly till
31.7.2019 and thereafter, an agreement between
the parties was extended from 1.8.2019 till
the appointment of new agency or 31.1.2020,
whichever is earlier. The record indicates
that as some discrepancies were found and
reported by the authority to the respondent
authority, a show cause notice was issued on
6.11.2019 at AnnexureH to the petition asking
the petitioners to show cause within a period
of two days from the date of the said notice.
The said notice dated 6.11.2019 speaks of the
fact that such a notice was given to the
petitioner no.1 as to why the contract should
not be canceled. The record further indicates
that instead of 2 days, the petitioner filed
its reply on 18.11.2019 i.e. after about 12
days, which culminated into the impugned order
dated 5.12.2019, whereby the respondent
authority came to the conclusion that the
petitioner has committed breach of the
contract dated 1.1.2018 and the respondent
authority was pleased to forfeit the deposit
and blacklist the petitioner for a period of 3
years and being aggrieved by the same, the
present petition is filed.
4. Mr. Bharat S. Patel, learned Senior Advocate
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for the petitioners submitted that the
impugned order is passed without considering
the reply filed by the petitioners and the
petitioners have been blacklisted without any
proper notice. Mr. Patel also invited
attention of this Court to the affidavitin
reply filed by the respondent authority and
contended that even in the reply, the
respondent has not been able to point out that
the notice for blacklisting was given to the
petitioner and that an opportunity of being
heard was granted to the petitioners before
passing the impugned order for blacklisting
the petitioner for a period of 3 years. Mr.
Patel submitted that such action is taken
without considering the basic principles of
the natural justice and the same being bad,
the impugned order deserves to be quashed and
set aside. Mr. Patel submitted that such
action on the part of the respondent authority
has affected the petitioners badly and because
of the order, the petitioner is not in a
position to even bid for similar tender
notices. Mr. Patel has relied upon the
judgment of the Hon'ble Supreme Court in the
case of UMC Technologies Private Limited Vs.
Food Corporation of India & Anr., reported in
2020 SCC OnLine SC 934 to buttress his
arguments. In view of the aforesaid, Mr. Patel
submitted that the petition deserves to be
C/SCA/861/2020 JUDGMENT
allowed by quashing the impugned order.
5. Per contra, Ms. Dhwani Tripathi, learned
Assistant Government Pleader for the
respondent has relied upon the affidavitin
reply filed by the respondent and has
contended that a show cause notice was given
to the petitioners and the reply filed by the
petitioners has also been considered while
passing the impugned order. Ms. Tripathi
further contended that except general denial,
no specific reply has been given by the
petitioners. Ms. Tripathi further submitted
that several complaints were received by the
operators and the stakeholders and the
respondent authority, after considering the
material on record, has passed a reasoned
order and therefore, the same does not require
to be interfered with and the petition may be
dismissed.
6. In reply to the same, Mr. B.S. Patel, learned
Senior Advocate for the petitioners has relied
upon the affidavitinrejoinder and has
reiterated that such a drastic order of
blacklisting has been passed without any
notice and hearing.
7. No other or further submissions, grounds
and/or contentions are made by the learned
counsel appearing for the respective parties.
C/SCA/861/2020 JUDGMENT
8. In order to appreciate the contentions raised
by both the sides, it would be appropriate to
refer to the show cause notice dated 6.11.2019
at AnnexureH to the petition. A bare reading
of the said notice indicates that such a
notice was given by the Collector, Rajkot,
which indicates that the petitioners have
committed breach of certain conditions of the
contract and therefore, considering the same,
the petitioner no.1 was asked to show cause as
to why the contract should not be canceled.
There is no mention about blacklisting the
petitioners that too, for a period of 3 years.
As the record indicates, the show cause notice
was issued for the aforesaid purpose. Even in
the reply given by the petitioners, there is
no explanation as regards blacklisting. In
light of the aforesaid, before taking any
action against the petitioners for
blacklisting it for a period of 3 years, the
show cause notice ought to have been given
asking the petitioners to show cause as to why
it should not be blacklisted because of the
breach of conditions of the contract. In facts
of this case therefore, the impugned notice
cannot be termed as a valid notice for
blacklisting in the affidavitinreply filed
by the respondent. There is no whisper about
the fact that before passing order of
blacklisting, the petitioners have been given
C/SCA/861/2020 JUDGMENT
an opportunity of being heard.
9. The Hon'ble Apex Court in the case of UMC
Technologies Private Limited (supra), while
considering the similar set of circumstances,
has clearly laid down that there has to be an
appropriate show cause notice before taking
such drastic step of blacklisting. The Hon'ble
Apex Court has also observed that before
taking such action, an opportunity is to be
given to the noticee i.e. the present
petitioner.
10. It would be apt to refer to the relevant
observations made by the Hon'ble Apex Court in
the case of UMC Technologies Private Limited
(supra), which 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
C/SCA/861/2020 JUDGMENT
impermissible and without
jurisdiction to that extent. This
Court in Nasir Ahmad v. Assistant
Custodian General, Evacuee Property,
Lucknow and Anr., 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
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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.
11. After considering the decisions of the Hon'ble
Apex Court in the cases of Erusian Equipment &
Chemicals Ltd. v. State of West Bengal,
reported in (1975) 1 SCC 70, Raghunath Thakur
v. State of Bihar, reported in (1989) 1 SCC
229 and Gorkha Security Services v. Government
(NCT of Delhi) and Ors. reported in (2014) 9
SCC 105, it is further observed as under:
"19. In light of the above decisions,
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it is clear that a prior show cause
notice granting a reasonable
opportunity of being heard is an
essential element of all
administrative decisionmaking 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.
20. In the present case, the factum
of service of the show cause notice
dated 10.04.2018 by the Corporation
upon the appellant is not in dispute.
Rather, what Shri Banerji has argued
on behalf of the appellant is that
the contents of the said show cause
notice were not such that the
appellant could have anticipated that
an order of blacklisting was being
contemplated by the Corporation.
Gorkha Security Services (supra) is a
case where this Court had to decide
whether the action of blacklisting
could have been taken without
specifically proposing/contemplating
such an action in the showcause
notice. For this purpose, this Court
laid down the below guidelines as to
the contents of a show cause notice
pursuant to which adverse action such
as blacklisting may be adopted:
"Contents of the showcause notice
21. The central issue, however,
pertains to the requirement of
stating the action which is proposed
to be taken. The fundamental purpose
C/SCA/861/2020 JUDGMENT
behind the serving of showcause
notice is to make the noticee
understand the precise case set up
against him which he has to meet.
This would require the statement of
imputations detailing out the alleged
breaches and defaults he has
committed, so that he gets an
opportunity to rebut the same.
Another requirement, according to us,
is the nature of action which is
proposed to be taken for such a
breach. That should also be stated so
that the noticee is able to point out
that proposed action is not warranted
in the given case, even if the
defaults/breaches complained of are
not satisfactorily explained. When it
comes to blacklisting, this
requirement becomes all the more
imperative, having regard to the fact
that it is harshest possible action.
22. The High Court has simply stated
that the purpose of showcause notice
is primarily to enable the noticee to
meet the grounds on which the action
is proposed against him. No doubt,
the High Court is justified to this
agent, However, it is equally
important to mention as to what would
be the consequence if the noticee
does not satisfactorily meet the
grounds on which an action is
proposed. To put it otherwise, we are
of the opinion that in order fulfil
the requirements of principles of
natural justice, a showcause notice
should meet the following two
requirements viz:
(i) The material/grounds to be
stated which according to the
department necessitates an action;
C/SCA/861/2020 JUDGMENT
(ii) Particular penalty/action which
is proposed to be taken. It is this
second requirement which the High
Court has failed to omit.
We may hasten to add that even if it
is not specifically mentioned in the
showcause notice but it can clearly
and safely be discerned from the
reading thereof, that would be
sufficient to meet this requirement."
12. In the case on hand also, as discussed
hereinabove, the order of blacklisting dated
5.12.2019 is passed by the respondent without
any proper notice and without adhering to the
principles of natural justice and hence, the
impugned order dated 5.12.2019 as far as
blacklisting is concerned, is hereby quashed
and set aside as the same is without any
proper notice and without adhering to the
basic principles of natural justice. However,
as far as the order of forfeiture is
concerned, it would be open for the
petitioners to take appropriate recourse
available in law. The petition is thus
partly allowed. However, there shall be no
order as to costs.
(R.M.CHHAYA, J)
(R.P.DHOLARIA, J)
MRP
