M/S S.K. Patodia And Associates vs M.P. Power Management Co. Ltd.
2021 Latest Caselaw 6775 MP

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           The High Court Of Madhya Pradesh
                         Writ Petition No.2112 of 2021
        (M/s S.K.Patodia Vs. M.P. Power Management Co. Ltd and another)

Jabalpur, Dated :25.10.2021
      Shri Shashank Shekhar Durgekar, learned counsel for the petitioner.

      Shri Shiv Kumar Sharma, learned counsel for the respondent No.1.

The present petition has been filed challenging the order dated

03.12.2018 passed by the respondent No.2 whereby, the contract of the

petitioner has been terminated and a subsequent direction has been given

for debarring the petitioner from participating in any tender process for a

period of three years.

At the outset, learned counsel appearing for the petitioner submits

that he does not want to challenge the termination order but is challenging

the part of the impugned order whereby the petitioner firm has been

debarred from participating in further tender process. It is submitted that

the petitioner is a Chartered Accountant Firm and in pursuance to the

tender floated by the respondents for audit of power purchase bills for the

financial year 2017-2018, the petitioner has participated in the tender

process and was declared as a successful bidder. He entered into an

agreement with the respondents and thereafter while ascertaining accounts

certain differences with the management were found. With respect to

certain differences with the management a show cause notice was issued

to the petitioner indicating the termination of contract on account of

unsatisfactory work and despite of the fact that the petitioner has

completed the internal audit, the contract was terminated on 03.12.2018

on the ground of unsatisfactory work. It is pointed out that the show cause

notice issued to the petitioner does not spell anything regarding debarring

the petitioner from participating in any other tender process of the

respondent/company for a period of three years. It is argued that there is a

settled position of law that if proposed action is being taken by the

respondents regarding debarring or blacklisting the show cause notice

issued should clearly spell the same. In the present case, no such

averments were available in the show cause notice, thus order debarring

the petitioner for a period of three years for participating in further future

tender process is per se illegal and contrary to the law laid down by the

Supreme Court in the case of Gorkha Security Services Vs. Govt. (NCT

of Delhi) and others reported in (2014) 9 SCC 105 which was recently

being followed by the Supreme Court in the case of UMC Technologies

Private Ltd. Vs. Food Corporation Of India reported in 2021 (2) SCC

551. He has further relied upon the judgment passed in the case of

Kamtheen Security Services, Indore Vs. State of M.P. and others

reported in 2018 (2) MPLJ 106, wherein following the judgment in the

case of Gorkha Security Services (supra), the show cause notice issued

to the petitioner in that case and subsequent action of blacklisting was

quashed. The Hon'ble Supreme Court has held in the Gorkha Security

Services (supra) that it is mandatory that form and content of the show

cause notice should necessarily contain that action of blacklisting is

proposed against the employee. In such circumstances, the order

impugned passed by the respondents debarring the petitioner for a period

of three years is per se illegal and he has prayed for quashment of the part

of the order.

Counsel appearing for the respondents could not dispute the fact

that the show cause notice which is issued to the petitioner does not spell

the proposed action of debarring the petitioner but it is only with respect

to termination of an employee. As the termination part is not challenged

by the petitioner, therefore, no arguments with respect to termination are

required. The order terminating the services of the petitioner is hereby

upheld.

The Hon'ble Supreme Court in the case of Gorkha Security

Services (supra) has held as under :-

"27) In the instant case, no doubt show cause notice dated 6.2.2013 was served upon the appellant. Relevant portion thereof has already been extracted above. 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, notice further mentions that competent authority could take other actions as deemed fit. However, that may not fulfill 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.

28) As already pointed out above in so far as penalty of black listing 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, respondent could not have imposed the penalty of blacklisting.

29) No doubt, rules of natural justice are not embodied rules nor can they be lifted to the position of fundamental rights. However, their aim is to secure justice and to prevent miscarriage of justice. It is now well established proposition of law that unless a statutory provision either specifically or by necessary

implication excludes the application of any rules of natural justice, in exercise of power pre-judicially affecting another must be in conformity with the rules of natural justice."

The aforesaid judgment was recently followed by the Hon'ble

Supreme Court in the case of UMC Technologies (supra) wherein the

Supreme Court has held as under :-

"Thus from the above discussion, a clear legal position emerges that for a show cause notice to constitute the valid basis of a blacklisting order, such notice must spell out clearly, or its contents be such that it can be clearly inferred therefrom, that there is intention on the part of the issuer of the notice to blacklist the noticee. Such a clear notice is essential for ensuring that the person against whom the penalty of blacklisting is intended to be imposed, has an adequate, informed and meaningful opportunity to show cause against his possible blacklisting."

In the present case, the show cause notice Annexure P/1 only

speaks of termination of the contract of the petitioner and there is nothing

in the show cause notice to show that the respondents/employer is

proposing to initiate action for debarring the petitioner from further

participating in future tender process. In such circumstances, the order

impugned to the extent debarring the petitioner from participating in

future tender process is clearly unsustainable in the light of the aforesaid

judgments passed by the Hon'ble Supreme Court.

In such circumstances, the order is quashed as far as it relates to

debarring the petitioner from further tender process.

The petition is partly allowed to the aforesaid extent.

(Vishal Mishra) Judge

AM.

Digitally signed by ANINDYA SUNDAR MUKHOPADHYAY Date: 2021.10.27 09:40:08 +05'30'