Gujarat High Court

Urvi Construction Co vs Gujarat Water Supply And Sewerage ... on 25 April, 2023

Bench: Vaibhavi D. Nanavati

     C/SCA/21299/2022                                ORDER DATED: 25/04/2023




       IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

        R/SPECIAL CIVIL APPLICATION NO. 21299 of 2022
                             With
        R/SPECIAL CIVIL APPLICATION NO. 21300 of 2022
===================================================
                   URVI CONSTRUCTION CO.
                            Versus
        GUJARAT WATER SUPPLY AND SEWERAGE BOARD
===================================================
Appearance:
MR. RUSHABH H SHAH(7594) for the Petitioner(s) No. 1
MR. BHARGAV V PANDYA(7103) for the Respondent(s) No.
1,2,3,4
===================================================

 CORAM:HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI

                              Date : 25/04/2023

                         COMMON ORAL ORDER

1. Heard Mr. Rushabh H. Shah, learned advocate

appearing for the petitioner and Mr. Bhargav V. Pandya, learned

advocate appearing for the respondents.

2. By way of the present petition, the petitioner herein

is aggrieved by the impugned order dated 21.02.2022 passed by

the respondents herein blacklisting and debarring the petitioner

for a period of 3 years. The said fact was brought to the notice

of the petitioner by communications dated 29.07.2022 and

C/SCA/21299/2022 ORDER DATED: 25/04/2023

18.08.2022 addressed by the respondent nos. 3 and 4

respectively.

3. It is the case of the petitioner herein that the

petitioner is engaged in wide array of fields comprising of civil

infrastructure and various other construction works since years

together. The respondent no.4 passed the impugned order dated

21.02.2022, without issuance of show cause notice or granting

opportunity of hearing to the petitioner herein.

4. Being aggrieved by the aforesaid, the petitioner herein

has approached this Court by filing the present petition.

5. Mr. Bhargav Pandya, learned advocate appearing for

the respondents-authorities has placed on record the

communication dated 21.04.2023. Placing reliance on the same, it

was submitted that by a communication dated 21.04.2023, the

respondent authority has called the petitioner for offering of

hearing. The said communication dated 21.04.2023 is taken on

record.

6. In the aforesaid narrow compass of the matter, it is

C/SCA/21299/2022 ORDER DATED: 25/04/2023

apposite to refer to the position of law, in the case of UMC

Technologies Private Limited v/s. Food Corporation of India and

Anr. reported in AIR 2021 SC (CIVIL) 833, relevant Paras-13, 14,

16, 17, 18, 19 and 26 reads thus:

"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 notice 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

C/SCA/21299/2022 ORDER DATED: 25/04/2023

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.

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 Bengal 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 supported by legality.

XXX XXX

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. XXX XXX

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, 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 judgment 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

C/SCA/21299/2022 ORDER DATED: 25/04/2023

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. 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 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.

26. In view of our conclusion that the blacklisting order dated 09.01.2019 passed by the Corporation is contrary to the principles of natural justice, it is unnecessary for us to consider the other contentions of the learned counsel for the appellant. Having regard to the peculiar facts and circumstances of the present case, we deem it appropriate not to remit the matter to the Corporation for fresh consideration."

C/SCA/21299/2022 ORDER DATED: 25/04/2023

7. Considering the well settled legal position of law as

referred above and considering the submissions advanced by the

learned advocates appearing for the respective parties, the

impugned order dated 21.02.2022 passed by the respondent

authority blacklisting the petitioner for a period of 3 years and

communications dated 29.07.2022 and 18.08.2022 addressed by

the respondent nos. 3 and 4 respectively are quashed and set

aside. A show cause notice be issued to the present petitioner by

the respondent authorities and on issuance of show cause notice,

the petitioner herein to appear before the respondent authorities

and the provisions of the principles of natural justice be