IN THE HIGH COURT OF KARNATAKA AT BENGALURU
M.NAGAPRASANNA, J.
The Cap A Pie, Represented By Its Proprietor, Bhupeshkumar, S/o jagadishchandrashah – Appellant
Versus
The South Western Railways, Represented By Sr. Divisional Mechanical Engineer - Respondent
Writ Petition No. 22793 of 2022 (GM-TEN)
Decided on : 14-12-2022
Termination of Contract - Blacklisting - South Western Railways - [Collection, Washing & Ironing of Bedroll Linens supplied to AC coach passengers] - [GCC Service.claves.no.7.4.2] - The judgment discusses the termination of a contract and subsequent blacklisting of the petitioner for a period of 2 years by South Western Railways. The court found that the blacklisting was added to the order without prior notice to the petitioner, violating the principle of natural justice. The judgment refers to the case of SACI ALLIED PRODUCTS LTD. V. COLLECTOR OF CENTRAL EXCISE, (2005)7 SCC 159 to support its decision.
Fact of the Case:
The petitioner was awarded a contract by South Western Railways for the work of collection, washing, and ironing of bedroll linens supplied to AC coach passengers. The respondent terminated the contract and blacklisted the petitioner for 2 years due to the petitioner's failure to commence the work as per the contract terms.
Finding of the Court:
The court found that the blacklisting of the petitioner for 2 years was added to the order without prior notice, violating the principle of natural justice. The court quashed the order insofar as it blacklists/debars the petitioner from participating in any tender for a period of 2 years and reserved liberty to the respondent to issue a show cause notice concerning blacklisting of the petitioner.
Issues: The main issue was the validity of the blacklisting of the petitioner for 2 years without prior notice, and whether it violated the principle of natural justice.
Ratio Decidendi: The court held that adding blacklisting to the order without prior notice to the petitioner violated the principle of natural justice, citing the case of SACI ALLIED PRODUCTS LTD. V. COLLECTOR OF CENTRAL EXCISE, (2005)7 SCC 159.
Final Decision: The writ petition was allowed in part, and the order dated 10.11.2022 was quashed only insofar as it blacklists/debars the petitioner from participating in any tender for a period of 2 years. Liberty was reserved to the respondent to issue a show cause notice concerning blacklisting of the petitioner, seek a reply, consider the reply, and pass appropriate orders in accordance with the law in regard to the blacklisting of the petitioner.
ORDER :
The petitioner is before this Court calling in question the notice dated 10.11.2022 terminating the contract of the petitioner and seeks a consequential direction to permit the petitioner to execute the work in terms of the contract dated 17.10.2022.
2. Heard Sri. Girish V. Bhat, learned counsel appearing for the petitioner, Sri. B.S. Venkatanarayana, learned counsel appearing for the respondent and perused the materials on record.
3. Shorn of unnecessary details, facts in brief are as follows:
The petitioner is in the business of performing work of collection, washing and ironing of bedroll linen supplied to AC coach passengers in several trains coming under the respondent – South Western Railways. The respondent-South Western Railways issue a notice inviting tender for the aforesaid work which the petitioner is said to be performing on 24.05.2022. The petitioner participates in the said tender. On 17.10.2022 the respondent awards the contract in favour of the petitioner. In terms of the said order of award of contract, the petitioner requests permission to execute the work at M/s. Laundry Labs India Pvt. Ltd., which was not the one that was necessary in terms of the tender conditions. Noticing the fact the petitioner did not have appropriate infrastructure and had deliberately misrepresented with regard to the laundry space issues a notice on 02.11.2022 seeking to show cause as to why the contract of the petitioner should not be terminated.
4. The petitioner replies to the said notice. Pending consideration of the reply, certain developments take place. The respondent terminates the contract between the petitioner and the South Western Railways on account of the aforesaid circumstance of the act of the petitioner being in violation of tender conditions. It later transpires that the tender itself gets cancelled. In the light of the cancellation of the tender, what remains to be considered is, whether the impugned notice of termination would be necessary to be gone into.
5. The learned counsel appearing for the petitioner though would accept the fact that the tender has been cancelled and, in the light of such cancellation, the prayer with regard to termination of the contract of the petitioner would not survive, the learned counsel claims that he is still aggrieved of the impugned order dated 10.11.2022 insofar as it blacklists the petitioner for a period of 2 years.
6. On the other hand, the learned counsel for the respondent Sri.B.S.Venkatanarayan would refute the submissions to contend that since the petitioner has deliberately misrepresented before the Authorities, the action of blacklisting cannot be found fault with, but he would admit that the show cause notice issued was only with regard to termination of contract.
7. I have given my anxious consideration to the submissions made by the learned counsel for the respective parties and have perused the material on record.
8. The afore-narrated facts are not in dispute. With the subsequent development of cancellation of the tender itself, the issue now revolves around a narrow compass only with regard to the impugned order blacklisting the petitioner for a period of 2 years from the date of the said order i.e., from 10.11.2022. To consider the tenability of the said order of blacklisting, it is germane to notice the show cause notice issued to the petitioner seeking to show cause as to why the contract should not be terminated. The notice was issued on 02.11.2022, the notice so issued reads as follows:
Regd Office D/12 Pruthvi,
Nr Jodhpur Cross Roads,
Sette Road, Ahmedabad -350015
SEVEN DAYS NOTICE as per GCC Service.claves.no.7.4.2 (WITHOUT PREJUDICE)
Sub: The work of Collection, Washing & Ironing of Bedroll Linens supplied to AC coach passengers in various trains of SBC & YPR depots for a period of one year. Commencement of work.
Ref: 1. GeM Work Order No. GEMC5116677563978 Dated 17.10.2022
2. The Cap A Pie Ltr No. Nil, dated.01.11.2022
RECKITT & COLMAN OF INDIA LTD., V. COLLECTOR OF CENTRAL EXCISE
Reckitt & Colman of India Ltd. v. CCE [(1997) 10 SCC 379 : (1996) 88 ELT 641]
A blacklisting order requires a specific show-cause notice to uphold principles of natural justice; its absence renders the blacklisting illegal and arbitrary.
Blacklisting is a distinct administrative action from contract termination, carrying severe stigmatic and exclusionary consequences. It requires a specific, unambiguous show-cause notice and an indep....
The necessity of a specific show cause notice for blacklisting and the requirement to state the proposed action.
A show cause notice for blacklisting must be based on reasonable grounds and cannot be issued merely for breach of contract without substantial evidence of misconduct.
The necessity of a valid, particularised and unambiguous show-cause notice before passing an order of blacklisting or debarment.
The requirement for a fair hearing and a specific show cause notice before imposing the severe civil consequence of blacklisting, and the need for the authority to determine the period of punishment ....
Debarment from government tenders requires issuance of a Show Cause Notice stating intended action, ensuring compliance with principles of natural justice.
Login now and unlock free premium legal research
Login to SupremeToday AI and access free legal analysis, AI highlights, and smart tools.
Login
now!
India’s Legal research and Law Firm App, Download now!
Copyright © 2023 Vikas Info Solution Pvt Ltd. All Rights Reserved.