Telangana High Court

G. Shankar vs The Singareni Collieries Company ... on 1 July, 2024

Author: Surepalli Nanda

Bench: Surepalli Nanda

         HON'BLE MRS JUSTICE SUREPALLI NANDA

             WRIT PETITION No.4444 OF 2019


ORDER:

Heard Sri P.Shashidhar Reddy, learned counsel

appearing on behalf of the Petitioner and Sri P.Sri Harsha

Reddy, learned Standing Counsel for Singareni Collieries,

appearing on behalf of the Respondent Nos.1 to 3.

2. The petitioner approached the court seeking the

prayer as under:

".......to issue an appropriate Writ, Order or Direction more particularly one in the nature of a Writ of Mandamus declaring the proceedings issued by the Respondents vide RGI/GMO/MOC/534, dated 08/14.02.2019 as illegal, void, arbitrary and against the principle of natural justice and quash the same and consequently direct the respondents to release an amount of Rs.55.59 Lakhs along with FSD 5%, EMD and Security Deposit to the petitioner and pass such other order or orders as this Hon'ble Court may deem fit and proper in the circumstances of the case."

3. The case of the Petitioner, in brief, as per the

averments made in the affidavit filed by the Petitioner in

support of the present writ petition is as under :

a) It is the case of the petitioner that, in response to the

Tender Enquiry notice issued by the Singareni Collieries

Company Ltd., dated 02.01.2015, the petitioner had submitted

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his offer and after conducting due negotiations, the petitioner

was duly awarded Transport contract for Transportation of Coal

from Medapalli Opencast Project to Different CHPs, on weight

basis for a period of two years by work Order No.7600005755

dated 02.01.2015. Thereafter an agreement bond dated

06.01.2015 was executed. Thereafter the petitioner transport

commenced the transport work as per the understanding arrived

at the time of negotiations, and successfully executed the

transport work awarded to the petitioner transport company.

c) The petitioner Transport Company completed the above

said work in terms of the work order No. 7600005755, dated

02.01.2015 without any remark and with utmost satisfaction of

the respondents and the said contract was valid up to

01.01.2017. While the matter stood thus the 3rd Respondent

issued a proceedings vide RGI/MOC/G-13/CT/1289, dated

03.05.2016 without issuing any notice and without giving any

opportunity to the petitioner. The petitioner made

representations to the Respondents vide dt.10.01.2019 and

15.02.2019 to refund the amount of Rs.55.59 Lakhs along with

FSD 5%, EMD and Security Deposit and the same was received

by the respondents on the same day i.e., 10.01.2019 and

15.02.2019. However, without considering the petitioner's

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representations dt.10.01.2019 and 15.02.2019 for refund of the

amounts, the Respondent No.2 had passed impugned

proceedings vide RGI/GMO/MOC/534, dated 08/14.02.2019

without issuing any notice basing on the earlier letter dated

03.05.2016 issued by the 3rd respondent on the ground that the

petitioner breached the terms and conditions and due to non-

satisfactory performance of the contract for illegal diversion of

coal and that coal to the tune of 2086.11 MT was less received at

GDK 1 CHP during the period from January, 2016 to March, 2016

and that an amount of Rs.81,35,837/- is yet to be received from

the petitioner. It is further the case of the petitioner that vide

the impugned proceedings of the 2nd respondent dated 08/14-

02-2019 the petitioner was called upon to deposit an amount of

Rs.81,35,837/- immediately, an amount of Rs.20 Lakhs towards

Penalty equivalent to twice the amount of the security deposit

and further the petitioner was intimated that the petitioner would

be black listed from participating in the SCCL Tenders for a

period of two years.

d. The above said proceedings are clearly contrary to terms of

the agreement and against principles of natural justice. Thus,

aggrieved by the said proceedings dated 08/14.02.2019, the

present Writ Petition is filed.

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4. PERUSED THE RECORD :

A) The relevant portion of the order impugned dated

08/14.02.2019 issued by the 2nd Respondent bearing Ref.

No. RGI/GMO/MOC/534, dated 08/14.02.2019, reads as

under :

"During the execution of the contract it was established that you have diverted 72 trips of coal to unknown destination.

For that you were informed vide letter referred 2nd above that an amount of Rs. 55.59 lakhs will be recovered towards diverted coal cost. Accordingly, the amount was recovered from your running bills against the said contract.

Further, it was also established that during the execution of the referred contract Coal to the tune of 2086.11 MT was less received at GDK.1 CHP during the period from January 2016 to March 2016. For this vide letter 3rd cited above you were informed that an amount of Rs. 81,35,837/- will be covered from you. The amount is yet to be recovered from you. All the above acts of yours amount to breach of terms & conditions and non- satisfactory performance of the contract. Hence, the following action is proposed by invoking clauses A.4.1 and B.2, B.4.3 & B. 4.4 of the order/contract terms and conditions.

1. The following detailed amounts available with SCCL against this contract totalling to Rs.110.69 lakhs are forfeited.

Rs. Lakhs i. E.M.D converted as Security deposit : 5.00 ii. FSD submitted by the contractor : 5.00 iii. 5% retained amount from the running Bills of the contract : 100.69

------------

               Total                                 : 110.69
                                                    -------------

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2. You are advised to remit the amount of Rs.81,35,837/- immediately, as mentioned above.

3. You are advised to remit an amount of Rs.20 lakhs towards penalty equivalent to twice the amount of the Security Deposit.

4. You will be black listed from participating in the SCCL tenders for a period of 2 years."

B. This court passed interim orders in I.A.No.1 of 2019,

dated 06.03.2019 in favour of the petitioner and the said

interim order is existing as on date, relevant portion of

the said order is extracted as under:

"Prima facie reading of the order would show that the order was not passed preceded by a notice or opportunity whereas the order got civil and evil consequences.

Balance of convenience is in favour of the petitioner.

            Hence,     there    shall    be   an    interim
       suspension         of      proceedings        dated
       08/14.02.2019 in RGI/GMO/MOC/534"

C) Counter affidavit has been filed by the Respondents,

and in particular, Para Nos. 12 and 14 of the said counter

affidavit read as under:

"12. It is reiterated that on 30th March, 2016 in 3rd shift, the Lorry No.AP 15TB 9099, after taking load of coal at Medapalli Opencast was sent to GDK 1, CHP at about 1.50 AM of 31.03.2016 and the above Lorry did not report enroute at Check Post/GDK-1 CHP. Thereafter, a

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departmental vigilance enquiry was conducted and it is established that 72 coal loaded lorries worth of Rs.55.59 Lakhs were found diverted to destination other than GDK 1 CHP from January 2016 to March 2016.

14. It is reiterated that Clause-4.3 of the Purchase Order categorically stipulated that during the transportation of Coal, the Contractor's lorries shall ply only along the authorized route. If, any lorry is found with any quantity of Coal at any place, not falling within the authorized route, it shall be deemed to be violation of the contractual obligation on the part of the Contractor and the Company shall have a right to forfeit the Security Deposit. The Company shall also have right to impose further penalties equivalent to twice the amount of the Security Deposit. The Contractor shall also be liable to be blacklisted. It was also specifically stipulated that it shall not be a defense for the Contractor to plead that the lorry was taken in an unauthorized route due to the mistake or negligence of the Driver or cleaner or other employees appointed by the Contractor or due to the mistake or negligence of the third parties."

D. The relevant Technical and Commercial Terms and

Conditions entered in between the petitioner and the

respondent company in particular condition No.10, 4.3

and 4.4., reads as under:

10. Settlement of disputes:

"In all cases of disputes, the decision of the company shall be final. However, the dispute or difference of opinion arising between the SCCL, and the Contractor in respect of site plans, specifications, measurements, manner of execution or anything connected with the work, not specially provided for here under or in respect of meaning of any clause of the terms and conditions of the order shall be decided by 'CIVIL COURT of competent jurisdiction at Khammam district and Karimnagar district of Telangana State only and not by arbitration.

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Commercial Terms and Conditions:

4.3. During the transportation of Coal, the contractor's Lorries shall ply only along the authorised route. If any lorry is found with any quantity of Coal at any place not falling within the authorised route, it shall be deemed to be violation of the contractual obligation on the part of the contractor and Company shall have a right to forfeit the Security Deposit. The Company shall also have right to impose further penalties equivalent to twice the amount of the Security Deposit. The contractor shall also be liable to be blacklisted. It shall not be a defense for the contractor to plead that the lorry was taken in an unauthorized route due to the mistake or negligence of the Driver or cleaner or other employees appointed by the contractor or due to the mistake or negligence of the third parties.

4.4 Contractor, will be held responsible for plying the lorries in authorised routes and the above penalties can be imposed on the contractor not withstanding that he has no personal responsibility for the deviation from the authorised route. Apart from the above penalties, if any shortage of Coal are noticed when the Lorry is found following the deviated route, the cost of such coal shall be recovered from contractor's bills at market prices prevailing at the relevant time.

DISCUSSION AND CONCLUSION :

5. The specific grievance of the petitioner is that the

petitioner made representations to the Respondents vide

representations, dated 10.01.2019 and 15.02.2019 to refund the

amount of Rs.55.59 Lakhs along with FSD 5%, EMD and Security

Deposit and the same was received by the respondents on the

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same day i.e., 10.01.2019 and 15.02.2019, however, the 2nd

respondent without considering the petitioner's representations

dated10.01.2019 and 15.02.2019 for refund of the amounts had

passed impugned proceedings vide RGI/GMO/MOC/534, dated

08/14.02.2019 without issuing any notice to the petitioner,

without providing an opportunity of personal hearing to the

petitioner based on the earlier proceedings dated 03.05.2016

issued by the 3rd respondent on the ground that the petitioner

breached the terms and conditions and due to non-satisfactory

performance of the contract.

6. A bare perusal of the record indicates that even after the

registration of the case, the respondent company issued work

order to the petitioner dated 14.04.2016 for transportation of

coal from MOCP to different linkages for a period of 3 months

and said work is executed by the petitioner without any remarks,

the same indicates that Petitioner had no complaints from any

person. The order impugned dated 08/14-02-2019 of the 2nd

respondent is silent and does not give any details pertaining to

the actual loss incurred by the Respondent Corporation nor there

is any discussion as to the basis for arriving at the said figure, as

indicated vide the impugned order of the 2nd respondent, dated

08/14-02-2019. This Court opines that the order impugned

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dated 08/14.02.2019 is bereft of reasons and does not through

its reasoning justify the imposition of recovery of huge amounts

from the petitioner and further blacklisting the petitioner in the

SCCL tenders for a period of two years without issuing notice to

the petitioner without providing an opportunity of personal

hearing to the petitioner is ex-facie illegal, arbitrary,

unreasonable malafide and in clear violation of principles of

natural justice. It is too well settled a principle of law that orders

which are quasi judicial in nature would have to be a reasoned

order and that being conspicuous by its absence, this Court

opines that the impugned order dated 08/14.02.2019 passed by

the 2nd respondent warrants interference by this Court under the

present circumstances.

7. The learned counsel appearing on behalf of respondents

submits that, since the petitioner does not dispute the diversion

of 72 coal loaded lorries worth of Rs.55.59 Lakhs other than GDK

1 CHP and that during the execution of the referred contract Coal

to the tune of 2086.11 MT was less received at GDK.1 CHP

during the period from January 2016 to March 2016 and that an

amount of Rs. 81,35,837/- will be recovered from petitioner's

pending bills hence, as per the condition No.4.3 and 4.4. of

the Technical Terms and Conditions entered in between

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the petitioner and the respondent company, there is no

requirement of issuing any notice to the petitioner and the

said amount could be recovered straightaway from the

petitioner's pending bills since as per clause 4.3 the

petitioner cannot plead any defence on his part hence, it is

deemed that, the petitioner has violated the contractual

obligation on the part of the contractor/petitioner and the

Company shall have a right to forfeit the Security Deposit, and

the Company shall also have right to impose further penalties

equivalent to twice the amount of the Security Deposit.

8. This Court opines that the said plea's as put-forth by the

learned counsel appearing on behalf of the respondents are not

sustainable in view of the fact that, the same is in clear violation

of the audi alteram partem principle since admittedly the fact as

borne on record is that the petitioner had not been provided with

an opportunity of personal hearing prior to the passing of the

impugned order dated 08/14-02-2019 by the 2nd respondent.

a) The Apex Court in the judgment reported in

(2009) 12 SCC 40 in "UMA NATH PANDEY & OTEHRS v.

STATE OF UTTAR PRADESH & ANOTHER" at para Nos. 10 &

11 observed as under :

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"Para 10: The adherence to principles of natural justice as recognized by all civilized States is of supreme importance when a quasi-judicial body embarks on determining disputes between the parties, or any administrative action involving civil consequences is in issue. These principles are well settled. The first and foremost principle is what is commonly known as audi alteram partem rule. It says that no one should be condemned unheard. Notice is the best limb of this principle. It should apprise the party determinatively of the case he has to meet. Time given for the purpose should be adequate so as to enable him to make his representation. In the absence of a notice of the kind and such reasonable opportunity, the order passed becomes wholly vitiated. Thus, it is but essential that a party should be put on notice of the case before any adverse order is passed against him. This is one of the most important principles of natural justice. It is after all an approved rule of fair play. The concept has gained significance and shades with time. When the historic document was made at Runnymede in 1215, the first statutory recognition of this principle found its way into the "Manga Carta". The classic exposition of Sir Edward Coke of natural justice requires to "vocate, interrogate and adjudicate". In the celebrated case of Cooper v. Wandsworth Board of Works the principle was thus stated: (ER p.420). "Even God did not pass sentence upon Adam before he was called upon to make his defence. 'Adam' (says God), 'where art thou? hast thou not eaten of the tree whereof I commanded thee that thou shouldest not eat".

Since then the principle has been chiselled, honed and refined, enriching its content. Judicial treatment has added light and luminosity to the concept, like polishing of a diamond.

Para 11 : "Principles of natural justice are those rules which have been laid down by the courts as being the minimum protection of the rights of the individual against the arbitrary procedure that may

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be adopted by a judicial, quasi-judicial and administrative authority while making an order affecting those rights. These rules are intended to prevent such authority from doing injustice".

B) The Apex Court in the judgment reported in

(2023) 6 SCC 1 in State Bank of India & Ors., Vs. Rajesh

Agarwal & Ors., at para Nos. 85 & 86 observed as under :

85. Fairness in action requires that procedures which permit impairment of fundamental rights ought to be just, fair, and reasonable. The principles of natural justice have universal application and constitute an important facet of procedural propriety envisaged under Article 14. The rule of audi alteram partem is recognised as being a part of the guarantee contained in Article 14.A Constitution Bench of this Court in Tulsiram Patel has categorically held that violation of the principles of natural justice is a violation of Article 14. The Court held that any State action in breach of natural justice implicates a violation of Article 14: (SCC p.

476, para 95)

"95. The principles of natural justice have thus come to be recognised as being a part of the guarantee contained in Article 14 because of the new and dynamic interpretation given by this Court to the concept of equality which is the subject-matter of that article. Shortly put the syllogism runs thus: violation of a rule of natural justice results in arbitrariness which is the same as discrimination; where discrimination is the result of State action, it is a violation of Article 14: therefore, violation of a principle of natural justice by a State action is a violation of Article 14. Article 14, however, is not the sole repository of the principles of natural justice. What it does is to guarantee that any lave or State action violating them will be struck down. The principles of natural justice, however, apply not only to legislation

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and State action but also where any tribunal authority or body of men, not coming within the definition of State" in Article 12, is charged with the duty of deciding a matter In such a case, the principles of natural justice require that it must decide such matter fairly and impartially." (emphasis supplied)

86. In Cantonment Board v. Taramani Devi, a two Judge Bench of this Court held that the rule of audi alteram partem is a part of Article 14. Similarly, in DTC v. Mazdoor Congress, this Court observed that the rule of audi alteram partem enforces the equality clause in Article

14. Therefore, any administrative action which violates the rule of audi alteram partem is arbitrary and violative of Article 14."

C) In "CANTONMENT BOARD v. TARAMANI DEVI",

reported in (1992) Supp (2) SCC page 501, a two-judge

Bench of this Court held that the rule of audi alteram

partem is a part of Article 14. Similarly, in "DTC v.

MAZDOOR CONGRESS" reported in (1991) Supp (1) SCC

600, the Apex Court observed that the rule of audi

alteram partem enforces the equality clause in Article 14.

Therefore, any administrative action which violates the

rule of audi alteram partem is arbitrary and violative of

Article 14.

9. The Apex Court in its Judgment reported in 1975 (1)

SCC Page 75 in "Erusian Equipment and Chemicals Ltd. v.

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State of West Bengal", at paras 17 and 20 observed as

under:

"17 ...The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with anyone but if it does so, it must do so fairly without discrimination and without unfair procedure. Reputation is a part of a person's character and personality. Blacklisting tarnishes one's reputation.

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."

10. The Apex Court in the Judgment reported in 1989 1

SCC Page 230 in "Raghunath Takur v. State of Bihar", at

para 4, observed as under:

"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

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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 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

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in accordance with law indicating the reasons therefor. We, however, make it quite clear that we are not expressing any opinion on the correctness of otherwise of the allegations made against the appellant. The appeal is thus disposed of."

11. The Apex Court in the Judgment reported in (2014)

9 SCC Page 105 in "Gorkha Security Services v.

Government (NCT of Delhi) and others", at paras 16 and

34, observed as under:

"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."

34. For the aforesaid reasons, we are of the view that the impugned judgment of the High Court does

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not decide the issue in the correct perspective. The impugned Order dated 11.09.2013 passed by the respondents blacklisting the appellant without giving the appellant notice thereto, is contrary to the principles of natural justice as it was not specifically proposed and, therefore, there was no show-cause notice given to this effect before taking action of blacklisting against the appellant. We, therefore, set aside and quash the impugned action of blacklisting the appellant. The appeals are allowed to this extent. However, we make it clear that it would be open to the respondents to take any action in this behalf after complying with the necessary procedural formalities delineated above. No costs."

12. This Court opines that the order impugned dated

08/14.02.2019 is bereft of reasons and does not through

its reasoning justify the imposition of recovery of huge

amounts from the petitioner and further black listing the

petitioner in the SCCL tenders for a period of two years, is

also unreasonable, and is contrary to the doctrine of

proportionality as well.

A) In the judgment of the Apex Court in Omkumar v

Union of India reported in 2001 (2) SCC 386, the Court

after considering the Wednesbury principles and the

doctrine of proportionality, has observed and held that the

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question of quantum of punishment in disciplinary matters

is primarily for the disciplinary authority and the

jurisdiction of the High Courts under Article 226 of the

Constitution or of the Administrative Tribunals is limited

and is confined to the applicability of one or other of the

well-known principles known as 'Wednesbury principles'.

In the Wednesbury case, (1948) 1 KB 223, it was

observed that when a statute gave discretion to an

administrator to take a decision, the scope of judicial

review would remain limited. Lord Greene further said

that interference was not permissible unless one or the

other of the following conditions was satisfied, namely,

the order was contrary to law, or relevant factors were

not considered, or irrelevant factors were considered, or

the decision was one which no reasonable person could

have taken.

B) In the case of B.C.Chaturvedi v Union of India

reported in 1995(6) SCC 749 it was observed and held at

para No.18 as under:

"18. A review of the above legal position would establish that the disciplinary authority, and on appeal the appellate authority, being fact- finding authorities have exclusive power to consider the evidence with a view to maintain

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discipline. They are invested with the discretion to impose appropriate punishment keeping in view the magnitude or gravity of the misconduct. The High Court/Tribunal, while exercising the power of judicial review, cannot normally substitute its own conclusion on penalty and impose some other penalty. If the punishment imposed by the disciplinary authority or the appellate authority shocks the conscience of the High Court/Tribunal, it would appropriately mould the relief, either directing the disciplinary/appellate authority to reconsider the penalty imposed, or to shorten the litigation, it may itself, in exceptional and rare cases, impose appropriate punishment with cogent reasons in support thereof."

C) In the case of Lucknow Kshetriya Gramin Bank (Now

Allahabad, Uttar Pradesh Gramin Bank) v Rajendra Singh

reported in 2013 (12) SCC 372 at para No.19, observed as

under:

"19. The principles discussed above can be summed up and summarised as follows:

19.1. When charge(s) of misconduct is proved in an enquiry the quantum of punishment to be imposed in a particular case is essentially the domain of the departmental authorities.

19.2. The courts cannot assume the function of disciplinary/departmental authorities and to decide the quantum of punishment and nature of penalty to be

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awarded, as this function is exclusively within the jurisdiction of the competent authority. 19.3. Limited judicial review is available to interfere with the punishment imposed by the disciplinary authority, only in cases where such penalty is found to be shocking to the conscience of the court. 19.4. Even in such a case when the punishment is set aside as shockingly disproportionate to the nature of charges framed against the delinquent employee, the appropriate course of action is to remit the matter back to the disciplinary authority or the appellate authority with direction to pass appropriate order of penalty. The court by itself cannot mandate as to what should be the penalty in such a case.

This Court opines that the present case falls under 19.3

and 19.4 extracted above.

D) The Apex Court in a judgment reported in (2007) 4

SCC 699 in Coimbatore District Central Co-operative Bank

Vs. Coimbatore District Central Co-operative Bank

Employees Association explained the concept of

proportionality in the following manner :

'proportionality' is a principle where the Court is concerned with the process, method or manner in which the decision-maker has ordered his priorities, reached a conclusion or arrived at a decision. The very essence of the decision-making consists in the attribution of relative

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importance to the factors and considerations in the case. The doctrine of proportionality thus steps in focus true nature of exercise - the elaboration of a Rule of permissible priorities. De Smith states that 'proportionality' involves 'balancing test' and 'necessity test'. Whereas the former (balancing test) permits scrutiny of excessive onerous penalties or infringement of rights or interests and a manifest imbalance of relevant considerations, the latter (necessity test) requires infringement of human rights to the least restrictive alternative'.

13. Taking into consideration

i) The aforesaid facts and circumstances of the case,

ii) The observations of the Apex Court in the judgments

(referred to and extracted above),

iii) Duly considering the averments made at para Nos.12

and 14 of the counter affidavit filed on behalf of

Respondents (referred to and extracted above),

iv) Duly taking note of the fact as borne on record that

there is no justification nor any reasoning in the order

impugned dated 08/14.02.2019 passed by the 2nd

Respondent herein,

v) Applying principle of doctrine of proportionality to