1997 Supreme(Cal) 375

High Court Of Calcutta
S. K. SEN
VIJAY SINGH NAHATA - Appellant
Versus
UNION OF INDIA - Respondent
W. P.  2144  Of  1995
Decided On : 09/22/1997

Headnote:

RAILWAYS - CONTRACT - BANNING ORDER - BLACKLISTING - ARBITRATION - WHETHER RAILWAY AUTHORITIES ARE ENTITLED TO BAN FUTURE DEALINGS WITH THE PETITIONER AND FOR AN ALLEGED OFFENCE WHAT SHOULD BE THE PUNISHMENT METED OUT ARE NOT DISPUTES ARISING OUT OF THE CONTRACT - SUCH QUESTION CAN NEVER BE DECIDED IN ARBITRATION - IT IS THE WRIT COURT WHICH CAN SET ASIDE THE BLACKLISTING ORDER - IF THE COURT DECLINES TO INTERFERE OR EXERCISES ITS POWER IN WRIT JURISDICTION IN SUCH CASES, THE NET RESULT IS THAT THE PETITIONER WOULD BE WITHOUT ANY REMEDY, SINCE THE SAID QUESTION IS NOT ARBITRABLE AT ALL.

Fact of the Case:

Petitioner, an approved contractor under the Eastern Railway, was placed on the list of approved contractors initially for a period of 2 years provisionally. The tenure of the petitioner as registered contractor with the concerned respondents was extended from time to time by communications made to that effect. Petitioner from time to time duly supplied the electrical goods as required by the respondent No. 3 since 1977 which were received by them and used and/or utilised by the respondents without raising any objection with regard thereto. On or about 11th April, 1990 search and seizure was conducted under Sections 103 and 165 of the Criminal Procedure Code at the residence of the petitioner and his office. Such search and seizure was conducted pursuant to the complaint made by one Mr. R. P. Rai, Inspector of Police, CBI/sbe Patna. By the memorandum dated 12th November, 1990 along with a statement of charges and misconduct, it has been alleged that the petitioner secured orders of number of items mostly requisitioned by the Official of the Eastern Railway at an exorbitant price causing wrongful loss to the railways. By the said memorandum, the respondent authorities proposed to suspend dealings with the petitioner and called for a representation from the petitioner within a period not later than 30 days from the date of the said memorandum. Even in the early part of the said year when the said memorandum was sent to the petitioner, the concerned respondent authorities had placed orders for supply of electrical goods urgently and such supplies have been duly made by the petitioner and duly received by the respondent authorities without any objection whatsoever either with regard to the quality or price. The petitioner replied to the said memorandum by letter dated 16th November, 1990 and lodged the petitioner's protest and contended that the allegations made in the said memorandum are baseless. In the statement of charges annexed to the show cause notice issued on 12th November, 1990, it was pointed out that the matter was being taken up for detailed investigation as it had become necessary in the public interest to temporarily suspend business dealings. The petitioner replied to the said show cause notice by his letter dated 16-11-90 and requested for a personal hearing. On the said date, the writ petitioner appeared before the appropriate authority and submitted, inter alia that- (a) The items being subject-matter of the impugned proceedings was sold by the petitioner pursuant to the purchase order placed by the respondents wherein the rates have been specified. The petitioner's offer was accepted by the respondents in preference to other offers and therefore the petitioner could not have made any offer worse than that submitted by the petitioner's business rivals. The prices being fixed by the purchase orders could not be subject to any variation. (b) The petitioner submitted a quotation dated 22nd December, 1988 being that of M/s. P. V. C. Wires and Cables Ltd. , a company belonging to 'usha Shriram' Group where from it would be evident that the price of the subject items prevailing at the relevant time was approximately the same as that charged by the petitioner. No response was, however, received from the respondents regarding the fate of the show cause notice. In the meanwhile, CBI enquiry was concluded in the writ petitioner's favour as would appear from the final report dated 3rd June, 1992 whereby it has been specifically observed that "from the facts and evidences collected during the course of investigation it could not be proved that the requisitioning officers were in any manner connected with the supplier firms and these officers caused any pecuniary benefit to the suppliers. Also there was no evidence found causing investigation to suggest that the rates charged by the supplier firms were exorbitant regarding most of the items supplied and in the circumstances of this case it is found not fit for prosecution in the Court of Law. " The said final report was accepted by the learned Special Judge, CBI, Patna on 26th August, 1992 and the case against the petitioner was dropped. The Railway Authorities have accepted the said decision and there is no challenge to the same by way of appeal or revision. In the meanwhile, on or about June 1995 the petitioner having become toallly frustrated, approached this Court for reference by way of monetary claims for arbitration which was done by order of Misra, J. dated 7th June, 1995. However, after a gap of 5 years, the respondents by a letter dated 30th October, 1995 informed the writ petitioner that "the Ministry of Railways (Railway Board), New Delhi have decided to ban business dealings with the petitioner for five years w. e. f. the date of issue of the letter. " The writ petitioner subsequently moved the writ petition on or about 8th December, 1995 challenging the ban on business dealings till 20th November, 2000.

Finding of the Court:

The Court found that the Railway authorities decided only to suspend business dealings till CBI investigation would be completed and the result known. The Railway authorities cannot take a different stand than that was taken in the letter of the Deputy Manager concerned and the Head of the Railways' i. e. the Minister of Railways who had represented that the bills could not be released as cases are under investigation by the CBI. The Court also found that the banning order contains no reason whatsoever and as such cannot be sustained. In spite of the detailed submissions made by the writ petitioner showing that materials with the price charged was not at all exorbitant the decision does not contain any discussion regarding the same. The Court also found that there is complete non-application of mind in passing the said order. The materials given by the writ petitioner and the findings of CBI have not been considered.

Issues: Whether the Railway authorities are entitled to ban future dealings with the petitioner and for an alleged offence what should be the punishment meted out are not disputes arising out of the contract.

Ratio Decidendi: The question whether the Railways are entitled to ban future dealings with the petitioner and for an alleged offence what should be the punishment meted out are not disputes arising out of the contract. The said questions are constitutional questions and the Court is to find out if the action taken by the Government or authority is based on fair play and devoid of arbitrariness and discrimination. Such question can never be decided in arbitration. It is the writ Court which can set aside the blacklisting order. If the Court declines to interfere or exercises its power in writ jurisdiction in such cases, the net result is that the petitioner would be without any remedy, since the said question is not arbitrable at all.

Final Decision: The writ petitioner succeeds in the writ petition. The banning order communicated to the petitioner by letter dated 30-10-95 stands quashed and set aside. There will be no order as to costs.