Umeshbhai Bherajibhai Rathod vs State Of Gujarat
2023 Latest Caselaw 3950 Guj

     C/SCA/25166/2022                                    ORDER DATED: 04/05/2023




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

             R/SPECIAL CIVIL APPLICATION NO. 25166 of 2022

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                        UMESHBHAI BHERAJIBHAI RATHOD
                                   Versus
                             STATE OF GUJARAT
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Appearance:
MS DHRUTI G PANDYA(10821) for the Petitioner(s) No. 1
MR NIRAJ SHAH , AGP for the Respondent(s) No. 1,2,3
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 CORAM:HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI

                                 Date : 04/05/2023

                                  ORAL ORDER

1. Heard learned advocate Ms. Kruti Shah on behalf of learned advocate Ms. Dhruti Pandya and learned AGP Mr. Niraj Shah for the respondents.

2. By way of the present petition, the petitioner herein being aggrieved by the action of respondent no.4, for blacklisting the vehicle being Escort Excavator having registration no. GJ 13 AD 8444, which is owned by the petitioner.

3. Learned advocate Ms. Shah, appearing for the petitioner submitted that while undertaking the aforesaid action of blacklisting the vehicle in question, the aforesaid action is undertaken without giving opportunity of hearing to the petitioner herein. The vehicle in question is owned by the petitioner herein, which came to be blacklisted by the respondent no.4. It was submitted that the aforesaid action at the instance of respondent

C/SCA/25166/2022 ORDER DATED: 04/05/2023

no.4 is against the settled principles of natural justice. It was incumbent to the respondent authorities to grant an opportunity of hearing the petitioner herein, before blacklisting the vehicle in question, owned by the petitioner herein.

4. Mr. Niraj Sharma, learned AGP appearing for respondent- State, was not in a position to controvert the aforesaid submission made by learned advocate Ms. Shah for the petitioner.

5. The petition is filed on the short ground of blacklisting the vehicles in question of the petitioners, without granting an opportunity of hearing to the petitioner.

6. POSITION OF LAW:

6.1. At this stage it is apposite to refer to the decision of the Hon'ble Supreme Court in the case of Dharampal Satyapal Ltd. v/s. Deputy Commissioner of Central Excise reported in (2015) 8 SCC 519, relevant para-27 of the order reads thus:

"27. From the aforesaid discussion, it becomes clear that the opportunity to provide hearing before making any decision was considered to be a basic requirement in the Court proceeding. Later on, this principle was applied to other quasi-judicial authorities and other tribunals and ultimately it is now clearly laid down that even in the administrative actions, where the decision of the authority may result in civil consequences, a hearing before taking a decision is necessary. It was, thus, observed in A.K. Kraipak's case (supra) that if the purpose of rules of natural justice is to prevent miscarriage of justice, one fails to see how these rules should not be made available to administrative inquiries."

C/SCA/25166/2022 ORDER DATED: 04/05/2023

6.2. 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 blacklisted person's reputation and brings the person's character into question.

Blacklisting also has long-lasting civil consequences for the

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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.

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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, 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 realised that blacklisting any person in

C/SCA/25166/2022 ORDER DATED: 04/05/2023

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."

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7. Considering the aforesaid position of law and the facts of the present case, which are uncontroverted and the vehicle in question which came to be blacklisted, without issuance of any show cause notice to the petitioner herein, is in the gross violation of principles of natural justice. On the aforesaid short ground, the action undertaken by the respondent no.4, blacklisting the vehicle bearing Escort Excavator having registration no. GJ 13 AD 8444, is quashed and set aside.

The petitions stand allowed to the aforesaid extent. However, it is open for the respondent-authorities to take appropriate action in accordance with law.

Direct service is permitted.

(VAIBHAVI D. NANAVATI,J) Radhika