Serial No. 06
Regular List
HIGH COURT OF MEGHALAYA
AT SHILLONG
WP(C) No. 386 of 2023 Date of Decision: 29.02.2024
M/s A.S. Transportation,
A sole proprietorship having its head office
at S.R. Mazumdar Lane, SMC Road, Meherpur,
Silchar and represented herein by its Propreitor
Msst. Husna Barbhuiya, daughter of Jahur Uddin
Barbhuiya, Age-33 years, resident of Niz Ambikapur,
Pt.-10, Meherpur, Silchar in the District- Cachar,
Assam. PIN-788015 :::: Petitioner
-Vs-
1. The Union of India,
Represented by the Secretary to the Department of
Food & Public Distribution, Ministry of Consumer
Affairs, Food & Public Distribution, Government
of India, Krishi Bhawan, New Delhi, PIN-110001
2. Food Corporation of India,
Represented by the Chairman & Managing
Director, Barakhamba Lane, New Delhi,
PIN-110001
3. General Manager,
Food Corporation of India, Regional Office, NEF
Region, Mawroh, Mawlai, Shillong Meghalaya,
PIN-793008
4. Deputy General Manager (Regional),
Food Corporation of India, Regional Office, NEF
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Region, Mawroh, Mawlai, Shillong, Meghalaya,
PIN-793008
5. Deputy General Manager (Finance),
Food Corporation of India, Regional Office, NEF
Region, Mawroh, Mawlai, Shillong, Meghalaya,
PIN-793008
6. Assistant General Manager,
Food Corporation of India, Regional Office, NEF
Region, Mawroh, Mawlai, Shillong, Meghalaya,
PIN-793008 ::::Respondents
Coram:
Hon ble Mr. Justice H. S. Thangkhiew, Judge
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Appearance:
For the Petitioner/Appellant(s) : Mr. M. Nath, Sr. Adv. with
Mr. D.I. Kapil, Adv.
Ms. C. Nongkhlaw, Adv.
For the Respondent(s) : Mr. B.K. Singh, Adv. with
Ms. S.Rumthao, Adv.
i) Whether approved for reporting in Yes/No
Law journals etc.:
ii) Whether approved for publication
in press: Yes/No
JUDGMENT AND ORDER (ORAL)
1. The petitioner on 28.08.2023, had participated and submitted its bid
for the work of Handling & Transport contract on regular basis for
“
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transportation of foodgrains/allied materials etc. from RH Kumarghat to
FSD Kumarghat via weighbridge (and vice versa) including
loading/unloading/handling of food grains/allied materials etc. at RH/FSD
Kumarghat, Tripura. (Godown Capacity: 6264 MT) , which was tendered
”
by the FCI on 07.08.2023. Immediately after submission of its bids, the
petitioner realized that it had quoted an unrealistically low rate for the work
and as such, requested the respondents to allow it to withdraw its bid. The
said offer for withdrawal was not acceded to by the respondents, and by
way of the impugned order dated 15.11.2023, the contract of the petitioner
was terminated and at the same time, the petitioner debarred from
participating in any future tenders of the respondent for a period of 2(two)
years. Being aggrieved with the debarment, without affording an
opportunity of being heard, the petitioner is before this Court by way of the
instant writ petition.
2. Mr. M. Nath, learned Senior counsel assisted by Mr. D.I. Kapil,
learned counsel for the petitioner has submitted that the action of the
respondents in not allowing the withdrawal of the petitioner s tender,
’
inspite of a specific request, and the representations which were preferred
after the Letter of Acceptance of Tender dated 20.10.2023, had been
issued, is highly arbitrary and unreasonable. He submits that the subsequent
action in terminating the contract vide the impugned order dated
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15.11.2023, and at the same time debarring the petitioner from
participating in any future tenders of the respondent for a period of 2(two)
years, which amounts to blacklisting, had been done without affording the
petitioner any chance to show cause or to be heard. In support of his
submissions, the learned Senior counsel has cited the following decisions.
(i) South Eastern Coalfields Limited & Ors. vs. S. Kumar s
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Associates AKM (JV) reported in (2021) 9 SCC 166.
(ii) UMC Technologies Private Limited vs. Food Corporation of
India & Anr. reported in (2021) 2 SCC 551.
nd
(iii) Judgment and order dated 2 December, 2015 passed in Ms
Chaitanya Projects vs. State of Meghalaya, WP(C) No. 309
of 2014.
3. Learned Senior counsel has also contended that, debarment being no
different from blacklisting, the denial of any opportunity to show cause has
affected the entire business prospects of the petitioner, who is engaged in
this kind of business only. He therefore prays that, the impugned order by
which the contract is terminated and the petitioner debarred from
participating in future tenders with the respondent Corporation be set aside
and quashed.
4. Mr. B.K. Singh, learned counsel for the respondent in reply to the
submissions, has drawn the attention of this Court to the clauses in the
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General Information to Tenderers and submits that, clause 7(iv) has
specifically provided that, on the tenderer s failure after the communication
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of acceptance of the tender, to furnish security deposit, the contract shall be
summarily terminated, that any losses or damages suffered will be
recovered from the contractor, and that the contractor will also be debarred
from participating in any future tenders of the Corporation for a period of
2(two) years. He also submits that in the Tender Submission Undertaking
signed by the petitioner at Para 8(l) thereof, it has been clearly stated that,
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no opportunity shall be given to the tenderer to alter, modify or withdraw
any offer at any stage after submission of the tender. He therefore contends
that, the petitioner being bound by the terms as aforementioned, and having
sought withdrawal after being the successful bidder, no relief is available,
or permissible and the writ petition is liable to be dismissed.
5. Having heard the learned counsel for the parties and having perused
the materials as placed, it is first noted from the submissions that, the
petitioner is more aggrieved with the debarment for a period of 2(two)
years, which has been argued to be the same penalty as one of the
blacklisting. As has been held by the Supreme Court, in the case of Patel
Engineering Ltd. vs. Union of India reported in (2012) 11 SCC 257, the
decision of the State or its instrumentalities not to deal with certain persons
or class of persons on account of the undesirability of entering into the
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contractual relationship with such persons is called blacklisting. In the
instant case, the petitioner has been debarred from participating in future
tenders with the respondent Corporation, as per clause 7(iv), contained in
the General Information to Tenderers, which reads as follows.
7. Security Deposit
“
(iv) In the event of the Tenderer s failure, after the
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communication of acceptance of the tender by the
Corporation, to furnish the requisite Security Deposit under
clause 7(i)a by the due date or requisite Security Deposit in
the form of Bank Guarantee under 7(i)b & 7(i)c including
extension period (applicable to submission of BG only), his
Contract shall be summarily terminated besides forfeiture of
the Earnest Money and the Corporation shall proceed for
appointment of another contractor. Any losses or damages
arising out of and incurred by the Corporation by such
conduct of the contractor will be recovered from the
contractor, without prejudice to any other rights and
remedies of the Corporation under the Contract and Law.
The contract will also be debarred from participating in any
future tenders of the Corporation for a period of two years.
After the completion of prescribed period of two years, the
party may be allowed to participate in the future tenders of
FCI provided all the recoveries/dues have been effected by
the Corporation and there is no dispute pending with the
contractor/party .
”
[Emphasis supplied]
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6. The term debarment therefore, as to whether it would tantamount
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to blacklisting, as has been sought to be made out by the petitioner, would
necessarily have to be viewed from the impact such debarment would have
on the petitioner, in the light of the law as laid down by the Supreme Court,
and whether its effect would be the same. In the case of Patel Engineering
Ltd. vs. Union of India (supra), the Supreme Court at Paras 13, 14 and
–
15, held as follows.
13. The concept of blacklisting is explained by this Court in
“ “ ”
Erusian Equipment & Chemicals Limited v. State of W.B. as under:
(SCC p. 75, para 20)
20. Blacklisting has the effect of preventing a person from
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the privilege and advantage of entering into lawful
relationship with the Government for purposes of gains.
”
14. The nature of the authority of the State to blacklist the persons
was considered by this Court in the abovementioned case and took
note of the constitutional provision (Article 298), which authorises
both the Union of India and the States to make contracts for any
purpose and to carry on any trade or business. It also authorises the
acquisition, holding and disposal of property. This Court also took
note of the fact that the right to make a contract includes the right
not to make a contract. By definition, the said right is inherent in
every person capable of entering into a contract. However, such a
right either to enter or not to enter into a contract with any person
is subject to a constitutional obligation to obey the command
of Article 14. Though nobody has any right to compel the State to
enter into a contract, everybody has a right to be treated equally
when the State seeks to establish contractual relationships. The
effect of excluding a person from entering into a contractual
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relationship with the State would be to deprive h person to be
treated equally with those, who are also engaged in similar activity.
15. It follows from the above judgment in Erusian Equipment case
that the decision of the State or its instrumentalities not to deal with
certain persons or class of persons on account of the undesirability
of entering into the contractual relationship with such persons is
called blacklisting. The State can decline to enter into a contractual
relationship with a person or a class of persons for a legitimate
purpose. The authority of the State to blacklist a person is a
necessary concomitant to the executive power of the State to carry
on the trade or the business and making of contracts for any
purpose, etc. There need not be any statutory grant of such power.
The only legal limitation upon the exercise of such an authority is
that the State is to act fairly and rationally without in any way being
arbitrary thereby such a decision can be taken for some legitimate
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purpose. What is the legitimate purpose that is sought to be
achieved by the State in a given case can vary depending upon
various factors.
”
7. In the instant case looking into the consequences, the debarment of
the petitioner has the same effect as blacklisting, though this term has not
been used in clause 7(iv) thereof, inasmuch as, the petitioner has been
prevented by the impugned order from entering into a contract or tendering
his offer for any work with the respondent Corporation for a period of
2(two) years. Apart from the loss of potential future business, the aspect of
being stigmatized by the debarment, also cannot be overlooked. As such, in
the considered view of this Court, the debarment of the petitioner in the
facts of the instant case amounts to blacklisting.
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8. In the case of UMC Technologies Private Limited (supra), as cited
by the petitioner, the Supreme Court at Paras 13, 14, 15 and 19, has held
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as follows.
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. Assistant Custodian General,
Evacuee Property 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.
14. Specifically, in the context of blacklisting of a person or
an entity by the state or a state corporation, the requirement
of a valid, particularized and unambiguous show cause notice
is particularly crucial due to the severe consequences of
blacklisting and the stigmatization that accrues to the
person/entity being blacklisted. Here, it may be gainful to
describe the concept of blacklisting and the graveness of the
consequences occasioned by it. Blacklisting has the effect of
denying a person or an entity the privileged opportunity of
entering into government contracts. This privilege arises
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because it is the State who is the counterparty in government
contracts and as such, every eligible person is to be afforded
an equal opportunity to participate in such contracts, without
arbitrariness and discrimination. Not only does blacklisting
take away this privilege, it also tarnishes the blacklisted
person s reputation and brings the person s character into
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question. Blacklisting also has long-lasting civil
consequences for the future business prospects of the
blacklisted person.
15. In the present case as well, the appellant has submitted
that serious prejudice has been caused to it due to the
Corporation s order of blacklisting as several other
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government corporations have now terminated their contracts
with the appellant and/or prevented the appellant from
participating in future tenders even though the impugned
blacklisting order was, in fact, limited to the Corporation s
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Madhya Pradesh regional office. This domino effect, which
can effectively lead to the civil death of a person, shows that
the consequences of blacklisting travel far beyond the
dealings of the blacklisted person with one particular
government corporation and in view thereof, this Court has
consistently prescribed strict adherence to principles of
natural justice whenever an entity is sought to be blacklisted.
19. In light of the above decisions, it is clear that a prior show
cause notice granting a reasonable opportunity of being
heard is an essential element of all administrative decision-
making and particularly so in decisions pertaining to
blacklisting which entail grave consequences for the entity
being blacklisted. In these cases, furnishing of a valid show
cause notice is critical and a failure to do so would be fatal to
any order of blacklisting pursuant thereto.
”
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9. The ratio of the above noted judgment clearly points the fact that,
compliance with the Principles of Natural Justice are essential,
notwithstanding the conditions contained in the Instructions to Bidders,
which in the above quoted referred case, was with regard to bidders, who
had been blacklisted or debarred. The petitioner therefore will surely be
entitled to be heard, inasmuch as, an order which has civil consequences
must be consistent with the Principles of Natural Justice.
10. In this view of the matter therefore, the respondent Corporation is to
afford adequate opportunity to the petitioner to represent against the
debarment, as given in the impugned order dated 15.11.2023.
11. Accordingly, in view of the observations and directions given herein
above, the part of the impugned order debarring the petitioner contained at
Para 7 thereof, is set aside and will be subject to orders that will be
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passed by the respondent Corporation, after affording an opportunity of
hearing.
12. Writ petition is allowed to the extent indicated above, and is
disposed of.
13. No order as to costs.
Judge
Meghalaya
29.02.2024
“D.Thabah-PS”
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