Telangana High Court

M/S. Agile Security Force Private ... vs The Superintendent on 11 April, 2023

Bench: Surepalli Nanda

 IN THE HIGH COURT OF TELANGANA AT HYDERABAD

               W.P. No. 17910 of 2022
Between:
M/s Agile Security Forces Pvt.Lt and others
                                     ... Petitioners
                          And

The State of Telangana and others
                                         ... Respondents

      JUDGMENT PRONOUNCED ON: 11.04.2023


    THE HON'BLE MRS JUSTICE SUREPALLI NANDA



1. Whether Reporters of Local newspapers     :    yes
   may be allowed to see the Judgment?

2. Whether the copies of judgment may be
   marked to Law Reporters/Journals?         :    yes

3. Whether Their Lordships wish to
   see the fair copy of the Judgment?         :   yes



                                    ___________________
                                    SUREPALLI NANDA, J
                                                              WP_17910_2022
                                2                                     SN,J




      THE HON'BLE MRS JUSTICE SUREPALLI NANDA

                  W.P. No. 17910 of 2022
% 11.04.2023

Between:


# M/s M/s Agile Security Forces Pvt.Lt and others
                                                ..... Petitioner
And

$ The State of Telangana and others
                                          .....Respondents

< Gist:
> Head Note:



! Counsel for the Petitioners   : Sri C.V.Mohan Reddy
                                   Senior Counsel
^ Counsel for the Respondents: G.P. for Medical & Health



? Cases Referred:
1. (1975) 1 SCC 70
2. (2014) 9 SCC 105
3. (2014) 14 SCC 731
4. Appeal (C) No.32840 of 2018
5. (2006) 7 SCC 275
6. (2020) 18 SCC 550
                                                                         WP_17910_2022
                                       3                                         SN,J




      THE HON'BLE MRS JUSTICE SUREPALLI NANDA

                      W.P. No. 17910 of 2022
ORDER:

Heard learned senior counsel Sri C.V. Mohan

Reddy for the Petitioner and learned Government

Pleader for Medical & Health on behalf of the

Respondents No.1 & 2.

2. This petition is filed by the petitioner to issue an

appropriate writ, order or direction more particularly in the

nature of Mandamus to declare the impugned Memo

Rc.No.G204/Peshi/2022, dated 02.04.2022 whereby

blacklisting the petitioner without giving opportunity, notice

and following due procedure as illegal, arbitrary,

unconstitutional, violative of principles of natural justice and

violative of Articles 14 and 21 of the Constitution of India and

consequently set aside the impugned Memo.

No.G204/Peshi/2022, dated 02.04.2022.

3. The case of the petitioners, in brief, is as follows:

a) The 1st petitioner company is in the business of

providing industrial security and also providing men on WP_17910_2022 4 SN,J

outsourcing basis for housekeeping and sanitation services to

various governmental agencies and private entities. The 2nd

petitioner is a shareholder in the 1st petitioner company.

b) The 1st respondent entered into an agreement with the

1st petitioner company for provision of the IHFM Services at

MGM Hospital, Warangal, which includes sanitation and pest

control Services, Security Services and patient care services.

c) The 1st petitioner stood L1 in Tender No.2-

1/IHFMS/SUPDT/WGL/2016-2017 Dated April, 17, 2017

(Tender) and entered into agreement on 18.04.2017 for a

period of three years from the date of agreement.

d) MGM Hospital, Warangal is a 1000 bedded hospital with

a built up area of 7,56,574 sq. ft and open area of 32,327 sq.

yards. As per the tender and agreement manpower of 393

has to be provided i.e. Security 100, Housekeeping and Pest

Control 193 and Patient Care 100.

e) The 1st petitioner has been providing the IHFM services

to the complete satisfaction of the respondents, which can be

seen from the satisfactory performance Certificates issued by

the 1st respondent.

                                                                   WP_17910_2022
                                   5                                       SN,J




f)       The      1st     respondent       issued     notice         vide

Rc.No.119/Peshi/2022,         dated    15.03.2022     directing        the

petitioner No.1 company to control rodents, mosquitoes and

cockroaches etc in RICU, SNCY Wards, Intensive Care Units,

Kitchen Complex, administrative building including the

Superintendent Chamber. Apart from already implemented

services under the tender/agreement, the 1st petitioner

additionally too all necessary steps to curtail the rodent's

movement and the same was informed to respondent on daily

basis.

g) The initial tenure concluded on 14.08.2020 and the

Secretary, Medical Health issued extension orders from time

to time, till the new tender process is completed.

h) A patient was admitted to the respiratory ICU at MGM

Hospital, Warangal having a history of chronic alcoholism,

with his liver, pancreas and kidneys badly affected and on

ventilator and was bitten by a rodent on the mid night of

30.03.2022. The said patient was shifted to NIMS, Hyderabad

and expired on 01.04.2022 due to complications from the

existing illness and not due to rat bite.

                                                            WP_17910_2022
                                6                                   SN,J




i)    The 1st respondent issued show cause notice on

02.04.2022 to the petitioner to submit explanation for the

lapses within three days or the higher authorities will black list

the petitioner company. The actions of respondents in issuing

the blacklisting notice on 02.04.2022 even before any

response was given by the 1st petitioner to the memo and

even before the completionof three days time to respond to

the memo is a complete violative of natural justice principles

and is also violative of the Fundamental Right guaranteed

under the Constitution of India. Hence, this writ petition.

4. The case of the respondents, in brief, is as

follows:

a) The contention of the petitioner raised in para 9 that the

petitioner is successful in providing the IHFMS services in

MGM Hospital Warangal is not true as during the petitioner's

contract period a penal punishment of Rs.3,48,327/- (Rupees

three lakhs forty eight thousand three hundred and twenty

seven only) was also imposed on the petitioner for not

providing satisfactory services in the month of March, 2022

with deduction in the invoice of the service bill.

                                                        WP_17910_2022
                             7                                  SN,J

b) Every month satisfactory performance certificate was

issued to the petitioner, but every month there was no 100%

satisfactory performance obtained by the petitioner and laso

in the month of March, 2022 only 93% of satisfactory

performance was recorded by the petitioner and a penal

punishment was also imposed by the Superintendent, MGM

Hospital, Warangal for unsatisfactory performance. The drain

and sewer network are very good, as the Executive Engineer

TSMIDC Warangal always monitors and conducts repairs and

renovations work regularly and there is no incident of the

petitioner submitting complaint of the bad sewer and drain

system.

c) Notice dated 15.03.2022 was issued to the petitioner

company that there is bad maintenance to control the rodents

and pest control system. Inspite of the said notice, the

petitioner had not taken any measures. A memo was also

issued on 02.04.2022 with regard to bad maintenance.

d) The petitioner submitted letter of intention not to

continue in providing service due to his lapse on controlling

workers supplied by him due to frequent agitations and

dharnas demanding to solve their problems. The petitioner WP_17910_2022 8 SN,J

accepted that there was a rat bite on the patient in RICU

which the petitioner's manpower has not controlled the rodent

population in MGM Hospital, Warangal and RICU is a critical

area where extra measures have to be taken by deploying

additional workers.

e) The Superintendent MGM Hospital Warangal was

instructed by his superior Director of Medical Education,

Hyderabad to immediately issue notice of blacklisting the firm

as there were previous notices were issued to rectify and the

petitioner was given ample time to rectify.

f) After issue of blacklisting of the agency of the petitioner

continued the service as the fresh IHFMS tenders were flouted

by the Director of Medical Education and the selection of the

new bidder was under process and since there was no

alternate measures to be taken due to emergency hospital

services the petitioner was permitted to continue until

finalization of tenders and was terminated immediately on

finalization of fresh tender. The petitioner was issued blacklist

notice because of gross mistake lapse and improper service

inspite of giving ample time to improve the services.

Therefore, the writ petition is liable to be dismissed.

                                                               WP_17910_2022
                              9                                        SN,J




5.   PERUSED THE RECORD :

A)   The     Memo      dt.    02.04.2022       vide       RC.No.

0204/Peshi/2022 of the Superintendent MGM Hospital,

Warangal reads as under :

"It is noticed that there are many lapses regarding sanitation pertain to all the premises of MGM Hospital, Warangal, including major departments that are like RICU, SNCU, ICCU and other departments, instead of giving you many instructions regarding sanitation still not rectified.

Hence, hereby informed to Agile management give the your explanation regarding the above mentioned lapses within three days otherwise it will be informed to higher authorities to keep you Agile Management in Block List as per the rules."

B. The Memo dt. 02.04.2022 vide RC No.

0204/Peshi/2022 of the Superintendent MGM Hospital,

Warangal forwarded to the petitioner by whatsapp

reads as under :

"It is bring to the notice of Agile Security Forces Pvt Ltd who are the Contractors for the Santation Security, Patient care and Pest Control for MGM Hospital that you WP_17910_2022 10 SN,J

have totally failed in maintaining proper sanitation in the MGM Hospital premises.

You were issued notices earlier and on 2.2.2022 and 15.03.2022 to rectify the problem, but in spite of that to steps are taken by your agency. This shows a very casual approach by the agency.

Hence, we are blacklisting the agency for not fulfilling the MOU clause of tender, 6.2.1 (Pest control, Rodent Control and termite treatment works).

6. 6.2.1 of the Tender Conditions read as under:

"6.2.1 Area of operation :

Area of operation for Pest Control, Rodent Control & Anti termite Treatment works are as follows:

a) The building and 3 meters surrounding area is to be protected.

b) The treatment for protection to control the following in each of the buildings and 3 meters surrounding area of such buildings:

1. Rat and rodents.

2. Snakes/Scorpions.

3. White/red/black ants/wood borers

4. Anti fungal

5. Anti termite

6. Mosquito/flies control

7. General disinfection

8. Bedbugs

9. Honey bees WP_17910_2022 11 SN,J

10. Any other related treatment as and when required as per need to maintain the standards in laboratories/hospital and Campus.

7. Counter Affidavit filed by Respondents, in

particular, paras 4 and 12 read as under :

"4. In reply to point 9, it is respectfully submitted that the contention of the petitioner raised in para 9 that he is successful in providing the IHFMS services in MGM Hospital Warangal is not true as during his contract period a penal punishment of Rs.3,48,327/- (Rupees three lakhs forty eight thousand three hundred and twenty seven only) was also imposed on the petitioner for not providing satisfactory services in the month of March, 2022 with deduction in the invoice of the service bill.

12. In reply to para 17, it is respectfully submitted that the petitioner was given ample time under principles of natural justice. The first notice was issued on 2.2.2022 and for this notice the petitioner submitted explanation stating that he was unaware of it and for the second notice on 15.03.2022 the petitioner has not taken any corrective measures to improve the services due to which the rat bite incident occurred damaging the hospital reputation and death of the patient. After giving ample time only the Superintendent, MGM, Hospital, Warangal has WP_17910_2022 12 SN,J

issued memo dated 02.04.2022 blacklisting the petitioner firm."

8. This Court vide its orders dt. 08.04.2022 in WP

No.17910 of 2022 passed interim orders in favour of

the Petitioner observing as follows and the same are in

force as on date:

"A perusal of the impugned memo dated 02.04.2022 shows that the petitioner agency has been blacklisted.

Admittedly, in this case, the respondent NO.1 - Superintendent, MGM Hospital, Warangal, has also issued the impugned memo dated 02.04.2022 asking the petitioner society to give an explanation within three days but even before the expiry of the said three days, the respondent has issued the impugned memo on the very same day blacklisting the petitioner agency.

This Court as well as the Hon'ble Supreme Court in number of cases has held that blacklisting a company/agency is a major punishment and has deprecated the practice of blacklisting the companies or agencies at the drop of a hat without giving an opportunity of hearing.

Therefore, the impugned memo dated 02.04.2022 is suspended. However, it is made clear that the petitioner shall see that the terms and WP_17910_2022 13 SN,J

conditions of the Memorandum of Understanding shall be fulfilled and also necessary sanitation and hygiene is maintained at the hospital concerned as per the terms and conditions of the Memorandum of Understanding.

Post on 21.04.202

DISCUSSION AND CONCLUSION :

9. A bare perusal of the contents of the Memo

02.04.2022 vide RC.No. 0204/Peshi/2022 of the

Superintendent MGM Hospital, Warangal (extracted to

above), calling upon the Petitioner to submit

Petitioner's explanation within 3 days failing which it

will be informed to the higher authorities to keep the

Petitioner in black list as per the rules, stating further

in the said Memo, that it was noticed that there were

many lapses regarding sanitation pertaining to all the

premises of MGM Hospital, Warangal including major

departments that are like RICU, SNCU, ICCU and other

Departments clearly indicates that the Show Cause

Notice issued to the Petitioner is not only vague but

also does not provide reasonable period to the

Petitioner to respond since it very clearly stipulates 3 WP_17910_2022 14 SN,J

days period which is not reasonable period and the

same amounts to denial of reasonable opportunity to

the Petitioner to represent Petitioner's case before it is

put on black list and admittedly is not only in clear

violation of Principles of Natural Justice but also

irrational.

10. A bare perusal of the contents of the black list

Memo vide RC No.0204/Peshi/2022, dated 02.04.2022

which was received by the Petitioner by Whatsapp at

around 9.30 p.m. clearly indicates that even before any

response could be issued by Petitioner No.1 Company

to the Respondent No.1, the Petitioner was black listed

without any application of mind in clear violation of

principles of natural justice, hastily, unilaterally,

without assigning any reasons on the ground that the

Petitioner totally failed to fulfil the MOU Clause of

tender 6.2.1 and failed to maintain proper sanitation in

the MGM Hospitals. But however, a bare perusal of the

material documents filed by the Petitioner at pages 20

to 79 of the Rejoinder filed by the Petitioner, relate to

Performance Certificates issued by the 1st Respondent WP_17910_2022 15 SN,J

and a bare perusal of the same clearly indicates the

Petitioner having scored more than 90% in all the

satisfactory performance certificates issued by the 1st

Respondent in favour of the Petitioner for the period

from August 2017 till July 2022. A bare perusal of the

material document at page 80 filed along with the

rejoinder dt. 14.09.2022 i.e., Work Completion/

Experience Certificate for the services provided during

the contract period i.e., from 15.08.2017 to 29.07.2022,

issued by the 1st Respondent herein also certifies the

Petitioner's performance as satisfactory as on the date

of completion of the contract i.e., 29.07.2022 and the

petitioner having completed contract value worth

Rs.2565 lakhs. This Court therefore opines that the

Petitioner was not provided with reasonable

opportunity to even respond to the Show Cause Notice

dt. 02.04.2022 and even before the Petitioner could

produce all the material evidence in support of his case

and place it before the Respondent Authority for

consideration, the order impugned was passed on

02.04.2022 itself by way of a whatsapp message at WP_17910_2022 16 SN,J

around 9.30 p.m., hastily, erroneously, irrationally, in

clear violation of Principles of Natural Justice.

11(i) The Apex Court in its judgment reported in

(1975) 1 SCC page 70 in M/s. Erusian Equipment &

Chemicals Ltd., vs. State of West Bengal and Another at

para 20 observed as under :

Para 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.

ii) In the case of "Gorkha Security Services Vs.

Government (NCT of Delhi) & Ors." reported in (2014)

9 SCC 105, the Hon'ble Supreme Court has held that the

necessity of compliance with the principles of natural

justice by giving an opportunity to the person against

whom action of blacklisting is sought to be taken has a

valid and solid rationale behind it. Many civil and/or WP_17910_2022 17 SN,J

evil consequences are involved with the order of

blacklisting. 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.

iii) In the case of "Kulja Industries Limited Vs. Chief

General Manager, Western Telecom Project Bharat

Sanchar Nigam Limited & Others" reported in (2014)

14 SCC 731, the Hon'ble Supreme Court has held that

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. The freedom to contract or not

to contract is unqualified in the case of private parties.

However, any such decision is subject to judicial review

if the same is taken by the State or any of its

instrumentalities. This implies that any such decision is

open to scrutiny not only on the touchstone of the

principles of natural justice but also on the doctrine of WP_17910_2022 18 SN,J

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. Whether the order

itself is reasonable, fair and proportionate to the

gravity of the offence, is also examinable by a writ

court.

iv) The Apex Court in the Judgment dated 16.08.2022

in Civil Appeal No. /2022 (@ Petition for Special Leave

to Appeal (C) No.32840/2018) in M/S CHAUHAN

BUILDERS RAIBARELI versus THE STATE OF UTTAR

PRADESH & ORS., reported in (2022) Live Law (SC) 694

observed that Contractor cannot be blacklisted for life.

The order of blacklisting to the extent that it has not

specified the period cannot be sustained. In the present

case the impugned Memo dt. 02.04.2022 issued by the

1st Respondent blacklisting the Petitioner does not

specify any period and simply says that the Petitioner's

Agency has been blacklisted for not fulfilling the MOU

Clause of the Tender 6.2.1.

                                                              WP_17910_2022
                               19                                     SN,J




v)    The Apex Court in its judgment in Rastriya Ispact

Nigam Ltd., Vs. Verma Transport Company reported in

(2006) 7 SCC 275 very clearly held that before

proposing to pass a black listing or debarring orders

the parties had to be given hearing followed by an

appropriate reasoned order.

vi) The Apex Court in its judgment (2020) 18 SCC 550

in Deffodills Pharmaceuticals Limited and Another vs.

State of Uttar Pradesh and Another in its head note

observed as under :

A. Government Contracts and Tenders Blacklisting - Effect of Hearing concerned person prior to blacklisting Essentially of Passing of adverse order based on assumption, that too without complying with principles of natural Justice-Impermissibility of

- Unilaterally passing adverse order against appellant for certain actions of its erstwhile Director who had left company long back-On facts held, order preventing procurement from appellant was of indefinite duration and disproportionate as it was passed on basis of assumption without hearing appellant - Considering long duration of operation of adverse order. Supreme Court itself decided matter without remanding matter to original authorities, and quashed the adverse order

- Held, blacklisting has the effect of preventing a person from privilege and advantage of entering into lawful relationship with Government for purposes of gains - The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to WP_17910_2022 20 SN,J

have an objective satisfaction - Fundamentals of fair play require that person concerned should be given an opportunity to represent his case before he is put on the blacklist.

vii). The Apex Court in the aforesaid Judgment, in

particular, at Para 14 observed as under :

14. The decisions in Erusian Equipment & Chemicals Ltd. v. State of WB and Raghunath Thakur v. State of Bihar as well as later decisions have now clarified that before any executive decision-maker proposes a drastic adverse action, such as a debarring or blacklisting order, it is necessary that opportunity of hearing and representation against the proposed action is given to the party likely to be affected. This has been stated in unequivocal terms in Raghunath Thakur as follows: (Erusian Equipment & Chemicals case. SCC p. 75. para

20)

"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."

12. This court opines that fundamentals of fair play

requires the person concerned should be given an

opportunity to represent his case before he is put on

the black list. In the present case admittedly as borne WP_17910_2022 21 SN,J

on record the Petitioner has been denied a reasonable

opportunity to put-forth his case against the proposed

black listing of the Petitioner in clear violation of

principles of natural justice since the Show Cause

Notice and also the order of blacklisting the Petitioner

are issued on the same date i.e., 02.04.2022.

13. Taking into consideration the interim order of this

Court dated 08.04.2022 passed in W.P.No.17190 of