Rishi Builders India Pvt. Ltd vs The State Of Bihar
2021 Latest Caselaw 77 Patna

          IN THE HIGH COURT OF JUDICATURE AT PATNA
                      Civil Writ Jurisdiction Case No.3601 of 2020
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Rishi Builders India Pvt. Ltd. having its registered office at Sri Krishna Nagar, Motihari, District- East Champaran, Bihar- 845401 and Administrative Office At House No. 45, Anandpuri, West Boring Canal Road, Patna- 800001, represented through its Managing Director, namely, Sri Shashi Bhushan Rai, aged about 56 years (male), son of Shadeo Rai, Govindganj, District- East Champaran.

... ... Petitioner/s Versus

1. The State of Bihar through Principal Secretary, Road construction Department, Government of Bihar, Patna.

2. The Principal Secretary, Road Construction Department, Government of Bihar, Patna.

3. The Engineer-in-Chief, Road Construction Department, Government of Bihar, Patna.

4. The Executive Engineer, Road Construction Department, Road Division, Motihari.

... ... Respondent/s ====================================================== Appearance :

For the Petitioner/s : Mr. Ashish Giri, Adv. For the Respondent/State : Mr. Narendra Kumar Singh, Adv. ====================================================== CORAM: HONOURABLE MR. JUSTICE ASHUTOSH KUMAR ORAL JUDGMENT Date : 07-01-2021

Heard the learned counsel for the parties.

2. The petitioner/company, which is a Class-I

contractor, has challenged the order dated 27.01.2020 Patna High Court CWJC No.3601 of 2020 dt.07-01-2021

passed by the Engineer-in-Chief, Road Construction

Department, Govt. of Bihar, Patna, whereby the petitioner's

firm has been blacklisted for ten years and the excess

amount, which is said to have been paid to the

petitioner/company for the work which was never executed,

has been directed to be recovered.

3. The matter was heard on 18.02.2020 and

this Court recorded as follows:

"2. It appears from the records that a tender was bagged by the petitioner for widening and strengthening of road for the year 2017-18. Certain anomalies were found by the Flying Squad with respect to the work executed by the petitioner/company and, therefore, a notice was issued to the petitioner/company on 06.08.2019, indicating such anomalies and the petitioner/company was directed to furnish his explanation within seven days of the receipt of such notice as to why the agreement with the petitioner/company be not cancelled. It further appears from the records that the petitioner/company sought certain documents for effectively replying to the notice especially the report of the Flying Squad which was never supplied to the petitioner/company.

3. From the order impugned, it appears that the report of the Flying Squad was analyzed by a Special Committee under the Chairmanship of the Chief Engineer of the Road Construction Department, which then recommended for serious action against the Patna High Court CWJC No.3601 of 2020 dt.07-01-2021

petitioner/company for having received payment without execution of actual work for which only the petitioner/company was held to be responsible. Considering such recommendation by the Committee referred to above, the petitioner/company has been blacklisted for ten years and the amount which is stated to have been paid in excess of the work, which was actually carried out by the petitioner/company, is directed to be recovered.

4. Learned counsel for the petitioner has challenged the aforesaid order on two grounds, namely, (i) that the notice which was served upon the petitioner/company did not indicate the action to be taken in case the explanation of the petitioner was not found to be satisfactory and (ii) that the Flying Squad report was never made available to the petitioner/company. Apart from this, it has also been urged that blacklisting the petitioner for ten years without adverting to the explanation which could have been offered by the petitioner, is much too harsh in comparison to the anomalies which have been pointed out by the Flying Squad.

5. Over and above, learned counsel for the petitioner has raised a grievance that without quantification of the amount which is said to have been received by the petitioner/company without the actual work having been carried out, the order of recovery is bad."

4. On the same day, i.e., on 18.02.2020, this

Court directed the State to file counter affidavit in the matter

and stayed the recovery from the petitioner/company.

5. In the counter affidavit, it has been stated Patna High Court CWJC No.3601 of 2020 dt.07-01-2021

that the relevant record of the work allotted to the

petitioner/company was verified and it was found that there

were huge inconsistencies in the actual work done and the

entries made in the measurement book.

6. On the basis of the aforesaid analysis, a

memo of charge, containing six charges, were framed and a

show-cause notice was asked from the petitioner/company

on 06.08.2019. When no reply to the show-cause notice

was received in the office of the respondents, a reminder

was sent to the petitioner/company on 24.10.2019. In the

meanwhile, the entire records were sent to the Special

Technical Committee which submitted its report on

14.11.2019, clearly stipulating that excess payment against

carriage and VAT/GST was also found.

7. It has further been submitted that since the

Special Technical Committee's report was not available when

the first show-cause notice was issued to the

petitioner/company, another show-cause notice,

incorporating the irregularities pointed out by the Special

Technical Committee, was issued and the petitioner/company Patna High Court CWJC No.3601 of 2020 dt.07-01-2021

was asked to reply within seven days, failing which, the

concerned Department would be free to take action under

the provisions of Bihar Contractors Registration Rules, 2007.

8. The show-cause notice was replied by the

petitioner/company reiterating its stand that all the works

had been carried out as per the agreement, but also asked

for certain documents to be supplied to it for filing a detailed

reply.

9. The aforesaid reply by the petitioner/company

was considered and only after due consideration, it was

found that the reply was unsatisfactory and that bills were

raised and payments were received without doing the actual

work. The petitioner/company was also found to have

received illegal payment for extra carriage without

submitting any voucher in support of the same.

10. It was also contended on behalf of the

respondent/State that the order of blacklisting is appealable

under Rule 11(d) of the Bihar Contractors Registration

Rules, 2007 and the petitioner/company would be well

advised to prefer an appeal rather than approach this Court Patna High Court CWJC No.3601 of 2020 dt.07-01-2021

straightway.

11. Mr. Ashish Giri, learned Advocate for the

petitioner/company has submitted that the grounds raised in

the reply have not at all been considered. He further

reiterates that the notice did not indicate the contemplated

action by the respondent/Department. The omission to state

such contemplated action in the notice has caused prejudice

to the petitioner/company in as much as there was no

effective representation on its behalf. Lastly, it has been

submitted that the decision of blacklisting and rescission of

agreement with the petitioner/company is based on the

report of the Flying Squad, which report has not been

furnished to the petitioner/company. It has also been urged

that blacklisting for such a long period of ten years is not at

all sustainable in the eyes of law.

12. On perusing the records and after hearing

the learned counsel for the parties, what becomes very clear

is that the notice to the petitioner/company did not at all

indicate the contemplated action in case the explanation was

to be found unsatisfactory. The document demanded by the Patna High Court CWJC No.3601 of 2020 dt.07-01-2021

petitioner/company, viz., the report of the Flying Squad has

not been furnished to the petitioner/company. There does

not appear to be any discussion or rationale in the impugned

order with respect to the blacklisting of the

petitioner/company for ten years.

13. In Gorkha Security Services Vs.

Government (NCT of Delhi) & Ors.; (2014) 9 SCC 105 , an

interesting question of law pertaining to the form and

content of show-cause notice which is required to be served

before deciding as to whether the noticee is required to be

blacklisted or not, was raised. In the aforesaid case, the

petitioner/noticee was aggrieved by the fact that the show-

cause notice made no reference to the proposed blacklisting

and, therefore, there was no effective opportunity of making

any representation in that regard. The aforesaid ground

amongst others raised by the petitioner therein did not find

favour with the learned Single Judge of the Delhi High Court,

which had held that the power to blacklist an entity was a

necessary concomitant of the executive power of the State

to carry on the trade or the business and making of Patna High Court CWJC No.3601 of 2020 dt.07-01-2021

contracts for any purpose. The purpose of show-cause

notice is primarily to enable the noticee to meet the grounds

on which an action is proposed against it. Absence of any

stipulation regarding contemplated action in case the

explanation is not found to be satisfactory does not make

the notice ambiguous and does not therefore render it open

to assail.

14. The aforesaid view of the learned Single

Judge of the High Court was affirmed and upheld by the

Division Bench of the High Court.

15. However, the Hon'ble Supreme Court

repelled the aforesaid logic and after referring to the

decisions of the Supreme Court rendered in Erusian

Equipment & Chemicals Ltd. Vs. State of West Bengal :

(1975) 1 SCC 70; Raghunath Thakur Vs. State of Bihar :

(1989) 1 SCC 229 and Patel Engineering Ltd. Vs. Union of

India : (2012) 11 SCC 257, held that not stating the

proposed action in the notice, renders the notice incomplete.

It is important to mention in the notice regarding the action

which is proposed to be taken. It was specifically held that

in order to fulfill the requirements of principles of natural Patna High Court CWJC No.3601 of 2020 dt.07-01-2021

justice, a show-cause notice must meet two requirements,

viz., (i) the material grounds must be stated, which

according to the Department necessitates an action and (ii)

particular penalty/action which is proposed to be taken.

16. The Supreme Court went on to explain that

if the proposed action is spelled out in the notice, the noticee

gets an opportunity of explaining why such extreme penalty

may not be justified. It can also make a list of extenuating

circumstances and specific explanation qua the defaults

pointed out by the Department.

17. Thus, it is well established by now that when

a harsh penalty like blacklisting is imposed, such

contemplated action, in the event of the explanation not

being found to be satisfactory, is required to be stated with

clarity in the notice and the absence of the same would

make the notice incomplete.

18. Apart from this, a very long duration of

blacklisting, prima facie, does not satisfy the conscience of

the Court. An order of blacklisting operates to the prejudice

of a commercial person not only in praesenti, but also is Patna High Court CWJC No.3601 of 2020 dt.07-01-2021

highly stigmatic and an echoes the death-knell of the

institution.

19. In Vetindia Pharmaceutical Ltd. Vs. State

of Uttar Pradesh & Anr. : 2020 SCC OnLine SC 912, the

Supreme Court has observed that 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 Department decides to

blacklist the entity, a different consideration may have

prevailed in their minds with regard to the duration of the

blacklisting. Blacklisting for a long period, prima facie, is

disproportionate. [refer to Kulja Industries Ltd. Vs. Chief

General Manager, Western Telecom Project Bharat

Sanchar Nigam Ltd. : (2014) 14 SCC 731 and Daffodills

Pharmaceuticals Ltd. Vs. State of U.P. : (2019) 17 Scale

758.]

20. The aforesaid discussion, therefore, makes it

imperative that the petitioner/company be allowed a fresh

opportunity of explaining his cause.

21. The order of blacklisting the

petitioner/company dated 27.01.2020, which has been Patna High Court CWJC No.3601 of 2020 dt.07-01-2021

impugned in the present petition, is, therefore, quashed.

22. The respondent/Road Construction

Department, Govt. of Bihar, Patna is directed to furnish a

fresh show-cause notice to the petitioner/company,

intimating the proposed course of action to be taken, in case

the explanation/reply of the petitioner/company will be found

to be satisfactory and also make available to the

petitioner/company the documents which have been relied

upon for primarily coming to the opinion that action need be

taken against the petitioner/company, within a period of four

weeks from the date of receipt/production of a copy of this

order.

23. The reply by the petitioner/company shall be

filed within a further period of four weeks thereafter.

24. The final decision shall be taken by the

respondent/Department, after considering the entire aspect

of the matter, within a further period of four weeks

positively by a reasoned order.

25. This time schedule has been given, keeping

in mind that blacklisting is a very serious penalty and has Patna High Court CWJC No.3601 of 2020 dt.07-01-2021

immeasurable evil consequences.

                                      26.      The      final      order    passed   by   the

                      respondent/Department              shall      be     communicated   the

                      petitioner/company forthwith.

27. With the aforesaid observation/direction, the

writ petition stands allowed and disposed off.

(Ashutosh Kumar, J) Praveen-II/-

AFR/NAFR                NAFR
CAV DATE                N/A
Uploading Date          16.01.2021
Transmission Date       N/A