2020 Supreme(SC) 660

SUPREME COURT OF INDIA
S. ABDUL NAZEER, B.R. GAVAI, JJ.
UMC Technologies Private Limited – Appellant
Versus
Food Corporation of India and Another – Respondents
Civil Appeal No. 3687 of 2020, S.L.P. (C) No. 14228 of 2019
Decided On : 16-11-2020

IMPORTANT POINTS
(1) In context of blacklisting of a person or an entity by State or a State Corporation, requirement of a valid, particularized and unambiguous show cause notice is particularly crucial due to severe consequences of blacklisting and stigmatization that accrues to person/entity being blacklisted.
(2) An order travelling beyond bounds of notice is impermissible and without jurisdiction to that extent.
(3) Mere existence of a clause in Bid Document, which mentions blacklisting as a bar against eligibility, cannot satisfy mandatory requirement of a clear mention of proposed action in show cause notice.

Headnote:

(A) Government Contract – Black-listing – In context of blacklisting of a person or an entity by State or a State Corporation, requirement of a valid, particularized and unambiguous show cause notice is particularly crucial due to severe consequences of blacklisting and stigmatization that accrues to person/entity being blacklisted – Blacklisting has effect of denying a person or an entity privileged opportunity of entering into government contracts – This privilege arises because it is State who is 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 takes away this privilege, it also tarnishes blacklisted person’s reputation and brings person’s character into question – Blacklisting also has long-lasting civil consequences for future business prospects of blacklisted person – In present case, appellant has submitted that serious prejudice has been caused to it due to Corporation’s order of blacklisting as several other government corporations have now terminated their contracts with appellant and/or prevented appellant from participating in future tenders even though impugned blacklisting order was, in fact, limited to Corporation’s Madhya Pradesh regional office – This domino effect which can effectively lead to civil death of a person, shows that consequences of blacklisting travel far beyond dealings of 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. (Paras 14 and 15)

(B) Government Contract – Black-listing – Termination of contract of service – 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 entity being blacklisted – In these cases, furnishing of a valid show cause notice is critical and failure to do so would be fatal to any order of blacklisting pursuant thereto – For a show cause notice to constitute 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 part of issuer of notice to blacklist noticee – Such a clear notice is essential for ensuring that person against whom penalty of blacklisting is intended to be imposed, has an adequate, informed and meaningful opportunity to show cause against his possible blacklisting – Action of blacklisting was neither expressly proposed nor could it have been inferred from language employed by Corporation in its show cause notice – Mere existence of a clause in Bid Document, which mentions blacklisting as a bar against eligibility, cannot satisfy mandatory requirement of a clear mention of proposed action in show cause notice – Corporation’s notice is completely silent about blacklisting and as such, it could not have led appellant to infer that such an action could be taken by Corporation in pursuance of this notice – Show cause notice does not fulfil requirements of a valid show cause notice for blacklisting – Order of blacklisting appellant clearly traversed beyond bounds of show cause notice which is impermissible in law – Consequent blacklisting order cannot be sustained – Order passed by High Court set aside and Corporation’s order quashed only so far as it blacklists appellant from participating in future tenders. (Paras 19, 21, 24, 25, 26 and 27)

(C) Natural Justice – 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 – Basic principle of natural justice is that before adjudication starts, authority concerned should give to affected party a notice of case against him so that he can defend himself – Such notice should be adequate and grounds necessitating action and penalty/action proposed should be mentioned specifically and unambiguously – An order travelling beyond bounds of notice is impermissible and without jurisdiction to that extent – It is essential for notice to specify particular grounds on the basis of which an action is proposed to be taken so as to enable noticee to answer case against him – If these conditions are not satisfied, person cannot be said to have been granted any reasonable opportunity of being heard. (Para 13)

Facts of the case:

Present appeal is directed against the order dated 13.02.2019 passed by the High Court of Madhya Pradesh at Jabalpur in Writ Petition No. 2778 of 2019. By the impugned order, the High Court has dismissed the writ petition and has upheld the validity of order dated 09.01.2019 passed by respondent no.1, Food Corporation of India through its Deputy General Manager (Personnel), who is respondent no. 2 herein, to terminate a contract of service with the appellant and to blacklist the appellant from participating in any future tenders of the Corporation for a period of 5 years. Appellant only seeks to contest the issue of blacklisting and not termination of the contract between the appellant and Corporation. Thus, sole issue that falls for determination is whether the Corporation was entitled to and justified in blacklisting the appellant for 5 years from participating in its future tenders.

Findings of Court:

Had the Corporation expressed its mind in the show cause notice to black list, appellant could have filed a suitable reply for the same. Therefore, show cause notice dated 10.04.2018 does not fulfil the requirements of a valid show cause notice for blacklisting.

Result : Appeal allowed.