Jharkhand High Court
M/S Sri Bhagwanjee Modern Rice Mill ... vs The State Of Jharkhand Through The ... on 24 January, 2024
Author: Ananda Sen
Bench: Ananda Sen
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P. (C) No. 2754 of 2023
M/s Sri Bhagwanjee Modern Rice Mill through its Proprietor namely
Sri Bhagwan Sah. ... ... Petitioner
Versus
1. The State of Jharkhand through the Secretary (Food), Department
of Food, Govt. of Jharkhand having its office at Project Bhawan,
Dhurwa, Ranchi.
2. The Jharkhand State Food and Civil Supplies Corporation Limited
through its Secretary having its office at JSFC Bhawan, Kadru Main
Road, Ranchi.
3. The District Manager, Jharkhand State Food Corporation,
Daltonganj, Palamau.
4. The District Manager, Jharkhand State Food Corporation, Garhwa.
5. Managing Director, Jharkhand State Food and Civil Supplies
Corporation Ltd., JSFC Bhawan, Kadru Main Road, Ranchi.
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CORAM: Sri Ananda Sen, J.
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For the Petitioner : Mr. Yogendra Prasad, Advocate
: Mr. Deb Nandan Rajak, Advocate
For the Respondent-Jharkhand
State Food and Civil Supplies
Corporation Ltd. : Mr. Mrinal Kanti Roy, Advocate
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Oral Order
09/Dated: 24.01.2024
Heard the counsel for the parties.
2. On the prayer made by the learned counsel appearing for the
parties, this writ application is taken up for final disposal at this stage
itself.
3. By filing this writ application, the petitioner has challenged the
order dated 19.04.2023 as contained in Memo No. 1528, issued by
the Managing Director, Jharkhand State Food and Civil Supplies
Corporation blacklisting the petitioner.
4. Learned counsel for the petitioner submits that this order of
blacklisting needs to be set aside on the grounds (i) violation of
principles of natural justice, as no notice indicating that the
respondents are intending to blacklist the petitioner, was issued prior
to issuance of this order and (ii) the period of blacklisting as
mentioned in the impugned order is in perpetuity, which is against the
settled principle of law.
5. Mr. Mrinal Kanti Roy, learned counsel appearing for the
Respondents-Jharkhand State Food and Civil Supplies Corporation
Ltd. refers to the impugned order and submits that several notices
[W.P. (C) No. 2754 of 2023]
were given to the petitioner to deposit the money or the balance of
remaining quantity of custom mill rice. The petitioner neither deposited
the money nor deposited the quantity of rice, thus, the impugned
order was passed. So far as the period of blacklisting is concerned, he
admits that the impugned order does not speak about the period of
blacklisting.
6. To decide the issue in question, it is not necessary to delve
deep in the facts of this case.
Admittedly in the petitioner's rice mill, paddy was entrusted to
the petitioner for the purpose of milling and transporting the same to
the Food Corporation of India.
On the allegation that the entire quantity was not transported to
the Food Corporation of India, several notices were issued to the
petitioner requesting/directing him to either pay the amount of the
unmilled paddy or rice or to refund the paddy, which is lying with
them.
The petitioner neither deposited the money nor returned the
paddy. As the petitioner did not comply the said notice, the impugned
order of blacklisting is passed.
After going through the impugned order, I find that there are
reference of notices in the impugned order, but, those notices are in
relation to the refund of the money and return of the paddy. From the
impugned order, it is clear that these notices are not relating to show
cause on the point of blacklisting. Further, from the impugned order, I
find that the firm of the petitioner has been blacklisted but the period
of blacklisting has not been mentioned. Since the period of blacklisting
is not mentioned, the said period is perpetual.
7. The Hon'ble Supreme Court in the case of Gorkha Security
Services v. Govt. (NCT of Delhi), (2014) 9 SCC 105 : 2014 SCC OnLine
SC 599 in paragraphs 16, 17, 18 and 20 has held as follows:-
"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.
[W.P. (C) No. 2754 of 2023]
17. Way back in the year 1975, this Court in Erusian Equipment &
Chemicals Ltd. v. State of W.B. [Erusian Equipment & Chemicals
Ltd. v. State of W.B., (1975) 1 SCC 70] , highlighted the necessity of
giving an opportunity to such a person 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. This is clear from the reading of paras 12 and 20 of the
said judgment. Necessitating this requirement, the Court observed
thus: (SCC pp. 74-75)
"12. Under Article 298 of the Constitution the executive power of the
Union and the State shall extend to the carrying on of any trade and
to the acquisition, holding and disposal of property and the making
of contracts for any purpose. The State can carry on executive
function by making a law or without making a law. The exercise of
such powers and functions in trade by the State is subject to Part III
of the Constitution. Article 14 speaks of equality before the law and
equal protection of the laws. Equality of opportunity should apply to
matters of public contracts. The State has the right to trade. The
State has there the duty to observe equality. An ordinary individual
can choose not to deal with any person. The Government cannot
choose to exclude persons by discrimination. 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.
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.
18. Again, in Raghunath Thakur v. State of Bihar [(1989) 1 SCC
229] the aforesaid principle was reiterated in the following manner:
(SCC p. 230, para 4)
"4. Indisputably, no notice had been given to the appellant of the
proposal of blacklisting the appellant. It was contended on behalf of
the State Government that there was no requirement in the rule of
giving any prior notice before blacklisting any person. Insofar as the
contention that there is no requirement specifically of giving any
notice is concerned, the respondent is right. But it is an implied
principle of the rule of law that any order having civil consequence
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. In that view of the matter, the last
portion of the order insofar as it directs blacklisting of the appellant
in respect of future contracts, cannot be sustained in law. In the
premises, that portion of the order directing that the appellant be
placed in the blacklist in respect of future contracts under the
Collector is set aside. So far as the cancellation of the bid of the
appellant is concerned, that is not affected. This order will, however,
not prevent the State Government or the appropriate authorities
from taking any future steps for blacklisting the appellant if the
[W.P. (C) No. 2754 of 2023]
Government is so entitled to do in accordance with law i.e. after
giving the appellant due notice and an opportunity of making
representation. After hearing the appellant, the State Government
will be at liberty to pass any order in accordance with law indicating
the reasons therefor. We, however, make it quite clear that we are
not expressing any opinion on the correctness or otherwise of the
allegations made against the appellant. The appeal is thus disposed
of. "
8. Further, the Hon'ble Supreme Court in the case of Kulja
Industries Ltd. v. Western Telecom Project BSNL, (2014) 14 SCC 731 :
2013 SCC OnLine SC 908 has held as follows:-
"10. Aggrieved by the above order the appellant once again
approached the High Court in WP No. 2289 of 2011 which was
heard and dismissed by a Division Bench of the High Court in terms
of the order [Kulja Industries Ltd. v. Western Telecom Project
BSNL, WP (C) No. 2289 of 2011, order dated 6-4-2011 (Bom)]
impugned in this appeal. The High Court was of the opinion that
reconciliation of the account had proved that the appellant had
received payment twice over for the supplies made by it and that
merely because the excess payment received had been subsequently
refunded by the appellant did not obliterate the act of misconduct
and fraud. The High Court observed:
"In the order impugned, the authority has stated that on the
reconciliation of the account, it was found as a fact that the
petitioner has received payment twice for the supply of the same
material, because the supply was on-going and the amount was
found to be payable to the petitioner, that was paid to him. Mere
payment of the amount does not wipe out the fact that the petitioner
had submitted the bills claiming double payment. In our opinion, in
view of this finding, no interference is called for in the order
impugned. The petition is rejected. No costs."
17. That apart, the power to blacklist a contractor whether
the contract be for supply of material or equipment or for the
execution of any other work whatsoever is in our opinion inherent in
the party allotting the contract. There is no need for any such power
being specifically conferred by statute or reserved by contractor.
That is because "blacklisting" simply signifies a business decision
by which the party affected by the breach decides not to enter into
any contractual relationship with the party committing the breach.
Between two private parties the right to take any such decision is
absolute and untrammelled by any constraints whatsoever. The
freedom to contract or not to contract is unqualified in the case of
private parties. But any such decision is subject to judicial review
when the same is taken by the State or any of its instrumentalities.
This implies that any such decision will be open to scrutiny not
only on the touchstone of the principles of natural justice but also
on the doctrine of proportionality. A fair hearing to the party being
blacklisted thus becomes an essential precondition for a proper
exercise of the power and a valid order of blacklisting made
pursuant thereto. The order itself being reasonable, fair and
proportionate to the gravity of the offence is similarly examinable
by a writ court."
[W.P. (C) No. 2754 of 2023]
9. Further, the Hon'ble Supreme Court in the case of UMC
Technologies (P) Ltd. v. Food Corpn. of India, (2021) 2 SCC 551 : 2020
SCC OnLine SC 934 at page 558 has held 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. This Court in Nasir Ahmad v. Custodian General,
Evacuee Property [Nasir Ahmad v. Custodian General, Evacuee Property,
(1980) 3 SCC 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."
10. Thus, in view of the aforesaid judgments, it is clear that
blacklisting cannot be for an indefinite period and also that order of
blacklisting cannot be passed without giving an appropriate
opportunity to show cause as to why the firm will not be blacklisted.
The notice to show cause on this issue would be specific on the point
of blacklisting. In the instant case, both these conditions are missing
and the pre-conditions are not complied with by the respondents.
11. Thus, I am inclined to allow this application. The impugned
order dated 19.04.2023 as contained in Memo No. 1528, issued by
the Managing Director, Jharkhand State Food and Civil Supplies
Corporation of blacklisting the petitioner is hereby, quashed. This
application stands allowed.
(Ananda Sen, J.)
APK
