The requirement of specific show cause notice before imposing penalties such as blacklisting, and the need to follow principles of natural justice in taking adverse actions against entities.

JUDGMENT :

MANOJ KUMAR OHRI, J.

By way of present petition filed under Article 226 of the Constitution of India, the petitioner seeks setting aside of order dated 05.07.2017 passed by respondent No. 2/Northern Railway (hereafter referred to as ‘respondent’) whereby petitioner's registration as a contractor with Indian Railways, was cancelled alongwith cancellation of lease contracts, forfeiture of security deposit and blacklisting for a period of 5 years.

2. Petitioner claims to be proprietorship firm registered with respondent vide Registration Certificate No. 00DLIA00044 dated 23.10.2015 that was valid for a period of five years under the Comprehensive Parcel Leasing Policy (CPLP)-2014. Mr. Sanoj Kumar Modi, the petitioner's proprietor was independently registered with respondent as a Contractor vide registration dated 10.12.2013 that was valid for a period of 5 years under the provisions of CPLP-2006.

3. It is further claimed that respondent awarded a contract to Mr. Modi to operate the parcel leasing space in Train No. 12622 RSLR from NDLS to CEN with effect from 30.04.2014 to 29.04.2017 vide Agreement dated 29.04.2014. On 30.12.2016 officials of respondent apprehended consignment of wine/alcoholic liquor being carried in the compartment that was leased to Mr. Modi at Nagpur Railway Station. A Show Cause Notice dated 31.12.2016 was issued to Mr. Modi thereby alleging that he committed violation of clause nos. 23.11, 34.4 & other clauses of the CPLP 2014, and in view of the same he is liable to pay penalty of Rs. 55,000/-. The Show Cause notice further stated that till further orders, his contract will remain suspended as a precautionary measure. In reply, Mr. Modi refuted the allegations and annexed excise documents to contend that the consignment was illegal. However, vide letter dated 07.01.2017 respondent communicated imposition of penalty in the form of cancellation of registration, cancellation of lease contracts, forfeiture of security deposit and blacklisting him for a period of 5 years. The said order was challenged by Mr. Modi through W.P.(C) 512/2017 wherein this Court vide order dated 19.01.2017 granted him the liberty to file an appeal before the appellate authority. In compliance, a detailed representation was submitted which came to be rejected by respondent No. 3 on 23.03.2017. The rejection was challenged before this Court by way of W.P.(C) 5831/2017 and was disposed of with liberty to invoke arbitration.

4. Reportedly, arbitration proceedings culminated in passing of an award on 05.02.2022 whereby the impugned orders dated 07.01.2017 and 23.03.2017 were set aside. Even, belated objections filed by the respondent under Section 34(3) of the Arbitration & Conciliation Act, have been dismissed on 24.03.2023.

5. In between, the respondent in consequence of the orders passed against Mr. Modi, also passed the impugned order dated 05.07.2017 against the petitioner's firm.

6. Ms. Sagarika Tanwar, learned counsel for the petitioner assailed the impugned order by submitting that the same has been passed against the petitioner solely on the basis of punitive action taken against Mr. Modi. She contended that the punitive action against Mr. Modi itself was without following the principles of natural justice as no prior show cause notice was issued to him on the proposed action, which has now been set aside. In this factual background, Ms. Tanwar submitted that the subsequent impugned order dated 05.07.2017 passed by respondent also needs to be set aside as the same is premised on the earlier two orders. Additionally, it was stated that even the consignment was also released by the respondent on 13.01.2017.

7. Ms. Arunima Dwivedi, learned counsel for the respondents, on the other hand, without disputing the aspect of dismissal of petition under Section 34(3) of the Arbitration & Conciliation Act, refutes the submissions made on behalf of the petitioner.

8. After carefully going through the records, this Court finds strength in th