M/S Ramesh Kumar vs The State Of Jharkhand
2021 Latest Caselaw 3929 Jhar

                                1

      IN THE HIGH COURT OF JHARKHAND AT RANCHI
                 W.P.(C) No. 5219 of 2019

M/s Ramesh Kumar, through its Proprietor Ramesh Kumar, Gumla
                                            ...    ...     Petitioner
                                  Versus
1. The State of Jharkhand
2. The Project Director, I.T.D.A., West Singhbhum at Chaibasa
3. The District Welfare Officer, West Singhbhum At Chaibasa
                                            ...    ...     Respondents
CORAM: HON'BLE MR. JUSTICE RAJESH SHANKAR
                      -----

For the Petitioner : Mr. Mahesh Kumar Sinha, Advocate For the Respondents : Mr. Mohan Kumar Dubey, AC to AG

-----

Order No. 06 Dated: 21.10.2021

The present writ petition has been filed for quashing the order as contained in memo no. 1212(B) dated 03.09.2019 (Annexure-6 to the writ petition) issued under the signature of the respondent no. 2 - the Project Director, I.T.D.A, West Singhbhum at Chaibasa, whereby the petitioner has been put on blacklist.

2. The factual background of the case as stated in the writ petition is that the respondents issued tender notice dated 06.08.2018 for supply of shoes and socks for students of Scheduled Tribe Residential Schools running under the control of Welfare Department, Government of Jharkhand for the financial year 2018-

19. The respondent no. 2 approved the samples and rate. Accordingly, supply order as contained in memo no. 1426 (B) dated 06.09.2018 was issued under the signature of the respondent no. 3 - the District Welfare Officer, West Singhbhum at Chaibasa to the suppliers annexing the list of articles. In pursuance of the said supply order, the petitioner supplied most of articles to the concerned schools on different dates and the concerned authorities of the schools received the said articles and issued the receipts of the same. The respondent no. 2 vide memo no. 761(B) dated 18.06.2019 asked explanation from the petitioner and one M/s Jagdamba Commercial Agency, Chaibasa within 24 hours from the date of receipt of this letter as to why they did not supply the uniforms of all the students as per their size and according to the sample. The petitioner on

receipt of the letter gave assurance that it would supply rest of the articles immediately. The respondent no. 3 vide memo no. 1043(B) dated 02.08.2019 directed the petitioner and M/s Jagdamba Commercial Agency, Chaibasa to supply the uniforms to the concerned residential schools within 5 days from the date of receipt of the said letter, failing which action for blacklisting would be taken. The petitioner filed an application dated 16.08.2019 addressing the respondent no. 3 stating that it would supply the remaining articles within the said month. However, the respondent no. 2 vide impugned order as contained in memo no. 1212(B) dated 03.09.2019 passed the order of blacklisting of the petitioner alleging that it failed to supply the items within time in spite of repeated directions.

3. The learned counsel for the petitioner submits that the petitioner has supplied most of the articles as per the supply order, however, the impugned order of blacklisting has been passed without following the rules, procedure and guidelines issued by the government and also without following the principles of natural justice. It is further submitted that the respondents have no jurisdiction to blacklist the petitioner on mere failure to supply the articles under normal circumstance. The petitioner is a supplier of government orders and its past conduct is satisfactory and has been issued experience certificate by the respondent no. 3. The impugned order of blacklisting has been passed with malafide intention since the petitioner had challenged the selection process of short tender notice issued vide memo no. 1021 (B/Ka) dated 29.07.2019 in W.P.(C) No. 4604 of 2019. It is also submitted that the impugned order blacklisting the petitioner has been passed for an indefinite period, which is contrary to law as laid down by the Hon‟ble Supreme Court in the case of "Vet India Pharmaceuticals Ltd. Vs. State of Uttar Pradesh & Ors." reported in (2021) 1 SCC 804.

4. Per contra, the learned counsel for the respondents submits that the respondents have jurisdiction and power to put the petitioner on blacklist. The articles for which the tender was floated were required for immediately use and were student specific and as such the time for supply of items was fixed as 30 days from the date

of receipt of the supply order. The petitioner did not make supply of single article within the time frame and the first supply was made after almost five months and thereafter it did not make any supply. It is wrong to say that the respondents did not follow the prescribed procedure before passing the impugned order of blacklisting. The petitioner was served a show cause notice dated 18.06.2019 and was allowed time to supply the items even beyond the stipulated time for use of the students and it gave undertaking to supply the items immediately. However, the petitioner again failed to make the supply and thus second show cause notice dated 02.08.2019 was issued to it specifically stating that if the petitioner fails to make the supply within 5 days from the date of receipt of the said letter, the action of blacklisting would be taken against it. The petitioner vide application dated 16.08.2019 made to the respondent no. 3, undertook to complete the supply within the same month, however, it failed to fulfill the commitment and thus the impugned order of blacklisting the petitioner has been passed.

5. Heard the learned counsel for the parties and perused the materials available on record.

6. The thrust of argument of the learned counsel for the petitioner is that the impugned order of blacklisting has been passed against the petitioner for an indefinite period in violation of the principles of natural justice and thus, the same is liable to be quashed.

7. I have perused the judgment rendered by the Hon‟ble Supreme Court in the case of "Vet India Pharmaceuticals Limited" (supra) as has been relied upon by the learned counsel for the petitioner, the relevant paragraphs of which read as under:

8. There is no dispute that the injection was not supplied to the respondents by the appellant. Yet the show-cause notice dated 21-10-2008 referred to further action in terms of the tender for supplying misbranded medicine to the appellant. Furthermore, the show-cause notice did not state that action by blacklisting was to be taken, or was under contemplation. It only mentioned appropriate action in accordance with the rules of the tender. The fact that the terms of the tender may have provided for

blacklisting is irrelevant in the facts of the case. In the absence of any supply by the appellant, the order of blacklisting dated 8-9-2009 invoking Clauses 8.12 and 8.23 of the tender is a fundamental flaw, vitiating the impugned order on the face of it reflecting non-

application of mind to the issues involved. Even after the appellant brought this fact to the attention of the respondents, they refused to pay any heed to it. Further, it specifies no duration for the same.

9. Erusian Equipment & Chemicals Ltd. v. State of W.B., (1975) 1 SCC 70, held that there could not be arbitrary blacklisting and that too in violation of the principles of natural justice. In Joseph Vilangandan v. Executive Engineer (PWD), (1978) 3 SCC 36, this Court was considering a show-cause notice as follows:

"17. ... „You are therefore requested to show cause ... why the work may not be arranged otherwise at your risk and loss, through other agencies after debarring you as a defaulter ...‟ The crucial words are those that have been underlined [Ed.: Herein italicised.] . They take their colour from the context. Construed along with the links of the sentence which precede and succeed them, the words "debarring you as a defaulter", could be understood as conveying no more than that an action with reference to the contract in question, only, was under contemplation. There are no words in the notice which could give a clear intimation to the addressee that it was proposed to debar him from taking any contract, whatever, in future under the Department."

(emphasis in original)

10. The question whether a show-cause notice prior to blacklisting mandates express communication why blacklisting be not ordered or was in contemplation of the authorities, this Court in [Gorkha Security Services v. State (NCT of Delhi), (2014) 9 SCC 105] held as follows: (SCC pp. 120-21 & 123, paras 27-28 & 33)

"27. We are, therefore, of the opinion that it was incumbent on the part of the Department to state in the show-cause notice that the competent authority intended to impose such a penalty of blacklisting, so as to provide adequate and meaningful opportunity to the appellant to show cause against the same. However, we may also add that even if it is not mentioned specifically but from the reading of the show-cause notice, it can be clearly inferred that such an action was proposed, that would fulfil this requirement. In the present case, however, reading of the show-cause notice does not suggest that noticee could find out that such an action could also be taken. We say so for the reasons that are recorded hereinafter.

28. In the instant case, no doubt the show-cause notice dated 6-2-2013 was served upon the appellant. Relevant portion thereof has already been extracted above (see para 5). This show-cause notice is conspicuously silent about the blacklisting action. On the contrary, after stating in detail the nature of alleged defaults and breaches of the agreement committed by the appellant the notice specifically mentions that because of the said defaults the appellant was "as such liable to be levied the cost accordingly". It further says „why the action as mentioned above may not be taken against the firm, besides other action as deemed fit by the competent authority‟. It follows from the above that main action which the respondents wanted to take was to levy the cost. No doubt, the notice further mentions that the competent authority could take other actions as deemed fit. However, that may not fulfil the requirement of putting the defaulter to the notice that action of blacklisting was also in the mind of the competent authority. Mere existence of Clause 27 in the agreement entered into between the parties, would not suffice the aforesaid mandatory requirement by vaguely mentioning other "actions as deemed fit". As already pointed out above insofar as penalty of blacklisting and forfeiture of earnest money/security deposit is concerned it can be imposed only, "if so warranted". Therefore, without any specific stipulation in this behalf, the respondent could not have imposed the penalty of blacklisting.

***

33. When we apply the ratio of the aforesaid judgment to the facts of the present case, it becomes difficult to accept the argument of the learned Additional Solicitor General. In the first instance, we may point out that no such case was set up by the respondents that by omitting to state the proposed action of blacklisting the appellant in the show-cause notice, has not caused any prejudice to the appellant. Moreover, had the action of blacklisting being specifically proposed in the show-cause notice, the appellant could have mentioned as to why such extreme penalty is not justified. It could have come out with extenuating circumstances defending such an action even if the defaults were there and the Department was not satisfied with the explanation qua the defaults. It could have even pleaded with the Department not to blacklist the appellant or do it for a lesser period in case the Department still wanted to blacklist the appellant. Therefore, it is not at all acceptable that non-mentioning of proposed blacklisting in the show-cause notice has not caused any prejudice to the appellant. This apart, the extreme nature of such a harsh penalty like

blacklisting with severe consequences, would itself amount to causing prejudice to the appellant."

11. If the respondents had expressed their mind in the show-cause notice to blacklist, the appellant could have filed an appropriate response to the same. The insistence of the respondents to support the impugned order [Vetindia Pharmaceuticals Ltd. v. State of U.P., 2019 SCC OnLine All 6734] by reference to the terms of the tender cannot cure the illegality in the absence of the appellant being a successful tenderer and supplier. We therefore hold that the order of blacklisting dated 8-9-2009 stands vitiated from the very inception on more than one ground and merits interference.

12. In view of the aforesaid conclusion, there may have been no need to go into the question of the duration of the blacklisting, but for the arguments addressed before us. An order of blacklisting operates to the prejudice of a commercial person not only in praesenti but also puts a taint which attaches far beyond and may well spell the death knell of the organisation/institution for all times to come described as a civil death. The repercussions on the appellant were clearly spelt out by it in the representations as also in the writ petition, including the consequences under the Rajasthan tender, where it stood debarred expressly because of the present impugned order. The possibility always remains that if a proper show-cause notice had been given and the reply furnished would have been considered in accordance with law, even if the respondents decided to blacklist the appellant, entirely different considerations may have prevailed in their minds especially with regard to the duration.

13. This Court in [Kulja Industries Ltd. v. Western Telecom Project BSNL, (2014) 14 SCC 731] , despite declining to interfere with an order of blacklisting, but noticing that an order of permanent debarment was unjustified, observed: (SCC p. 744, para 28)

"28.2. Secondly, because while determining the period for which the blacklisting should be effective the respondent Corporation may for the sake of objectivity and transparency formulate broad guidelines to be followed in such cases. Different periods of debarment depending upon the gravity of the offences, violations and breaches may be prescribed by such guidelines. While it may not be possible to exhaustively enumerate all types of offences and acts of misdemeanour, or violations of contractual obligations by a contractor, the respondent Corporation may do so as far as possible to reduce if not totally eliminate arbitrariness in the exercise of the power vested in it and inspire confidence in the fairness of the order which the

competent authority may pass against a defaulting contractor."

14. Since the order of blacklisting has been found to be unsustainable by us, and considering the long passage of time, we are not inclined to remand the matter to the authorities. In [Daffodills Pharmaceuticals Ltd. v. State of U.P., (2020) 18 SCC 550], relied upon by the appellant, this Court has observed that an order of blacklisting beyond 3 years or maximum of 5 years was disproportionate.

8. In the aforesaid judgment, Their Lordships while observing that no specific show cause was served to the appellants for blacklisting them, referring to the earlier judgments, have held that if the respondents had expressed their mind in the show cause notice to blacklist, the appellant could have filed appropriate response to the same and thus the order of blacklisting stood vitiated from the very inception.

9. However, in the present case, it appears that the petitioner was served specific show cause notice for the proposed action of blacklisting which was duly replied by it on 16.08.2019 and undertook to supply the items in the same month, however, failed to fulfill its undertaking and only thereafter the impugned order of blacklisting has been passed specifying the reasons that due to dilly- dallying approach of the petitioner the poor students have been deprived of getting uniforms in time.

10. It is a well settled principle of law that the State or its instrumentality is free to decide not to deal with certain persons or class of persons on account of undesirability of entering into contractual relationships with such persons by passing the order of blacklisting. There need not be any statutory grant of such power. However, the only legal limitation upon exercise of such a power is that the State is to act fairly and rationally and for some legitimate purpose. The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract and as such before passing such order, the principles of natural justice is required to be followed by serving a show-cause notice thereby giving him opportunity to meet the allegations which were in the mind of the

authority contemplating blacklisting of such a person.

11. Under the aforesaid facts and circumstance and keeping in view that before issuance of impugned order dated 03.09.2019, the petitioner was served show cause notice dated 02.08.2019 clearly mentioning that non-supply of uniforms in concerned residential schools within 05 days would compel the authorities to put it on blacklist, I do not see any procedural impropriety in issuance of the said order whereby the petitioner has been put on blacklist. I am thus of the view that the impugned order has been passed in due compliance of the principles of natural justice and, therefore, there is no ground to interfere with the merit of the impugned order of blacklisting under writ jurisdiction.

12. It, however, appears that the petitioner has been blacklisted for an indefinite period which is contrary to law as laid down by the Hon‟ble Supreme Court in the case of "Kulja Industries Limited Vs. Chief General Manager, Western Telecom Project Bharat Sanchar Nigam Limited & Ors." reported in (2014) 14 SCC 731. Thus, to that extent the impugned order is liable to be quashed.

13. Since the petitioner has suffered consequence of the order of blacklisting for more than two years, I am of the view that it would not be appropriate to remand the matter to the respondents to re-determine the period of punishment, rather the period of blacklisting already suffered by the petitioner is sufficient in the facts and circumstances of the present case.

14. Accordingly, it is observed that the petitioner is henceforth to be treated out of the blacklist in pursuance of impugned order as contained in memo no. 1212(B) dated 03.09.2019.

15. The writ petition is disposed of with aforesaid observations.

(Rajesh Shankar, J.) Manish/AFR