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2024 Supreme(Del) 952
IN THE HIGH COURT OF DELHI AT NEW DELHI
PRATEEK JALAN, J.
M/s Maan Builders Pvt. Ltd. - Petitioner
Versus
Union Of India And Ors - Respondents
W.P.(C) 16377 of 2023 & CM APPL. 65939 of 2023
Decided on : 08-11-2024
For the Petitioner:Mr. Vishal Gupta, Advocate.
For the Respondent:Mr. Farman Ali, SPC with Ms.Usha Jamnal, Advocate along with Mr. Manoj Kumar Yadav, ASO/CE-I, RB, Mr. Siri Krishnan, CLA/C, Kashmere Gate, Delhi and Mr. Tarun Kumar, Office
Superintendent, CA O/C office, Kashmere Gate, Northern Railways
Debarment orders must include sufficient reasoning and adhere to natural justice principles as they significantly impact the affected party, equating to civil death.
Headnote:(A) Constitution of India - Article 226 - Debarment from business dealings with governmental entities - Impugned order lacked adequate reasoning and did not comply with principles of natural justice - Natural justice demands disclosure of reasons for severe penalties like debarment, which is akin to civil death. (Paras 4, 6, 10)
(B) Blacklisting - The principles of natural justice must be adhered to, and orders of blacklisting should contain adequate reasons; absence of proper justification renders the order amenable to judicial review. (Paras 4.1, 4.5, 5)
Facts of the case:
The petitioner challenged an order debarring it and its allied firms from conducting business with Indian Railways for two years due to alleged misconduct involving the submission of incorrect information. The petitioner contended that the order lacked reasons for such a harsh penalty.
Findings of Court:
The impugned order was set aside as it failed to provide sufficient rationale for rejecting the petitioner's representation. The court emphasized the need for clear reasoning in debarment cases due to their severe implications on the petitioner’s business.
Issues: The court examined whether the impugned order provided adequate reasons for the debarment and complied with natural justice principles.
Ratio Decidendi: The court held that a debarment order must articulate sufficient reasons for the decision, and the lack thereof constituted a failure in procedural fairness.
Result: The order dated 17.02.2023 was set aside.
JUDGMENT :
PRATEEK JALAN, J.
1. The petitioner has filed this petition, under Article 226 of the Constitution, against the order dated 17.02.2023, by which the petitioner and its allied/sister firms were debarred for a period of two years from dealing with the Indian Railways and its production units. The principal ground of challenge is that the impugned order does not disclose any reasons.
2. The impugned order reads as follows:
“No.2022/CE-I/CBL/I/Maan Builders(3409117) New Delhi, Dated :17.02.2023
As per list attached.
Sub: Banning of business dealings with M/s Mann Builders, SC0-44, 2nd floor, Sector-12, Panchkula, Haryana-134112 and its allied/sister concerns.
M/s Maan Builders was served with a Memorandum and Statement of charges/Misconduct for banning of business dealings with them for concealing of information/submitting incorrect information by deviating from the contractual agreement with malafide intention,
2. Reply to the Memorandum submitted by M/s Maan Builders through Northern Railway has been considered in detail by the Competent Authority, who has concluded that M/s Maan Builders has concealed information/submitting incorrect information with malafide intention violating general conditions of contract.
3. It has therefore, been decided by Ministry of Railways (Railway Board) to ban business dealing with M/s Maan Builders, SCO-44, 2nd floor, Sector-12, Panchkula, Haryana-134112 and also with their allied/sister concerns/and partners for a period of 02 (two) years commencing with immediate effect on Indian Railways and Production Units etc. Zonal Railways/Production Units shall ensure to deactivate the login ID of M/s Maan Builders, SCO-44, 2nd floor, Sector-12, Panchkula, Haryana-134112 and its allied/sister firms for abovementioned period.
4. Receipt of this letter may please be acknowledged.”[Emphasis supplied]
3. Mr. Vishal Gupta, learned counsel for the petitioner, submits that the impugned order does not contain any reasons whatsoever, for imposition of a harsh penalty of debarment/backlisting upon the petitioner. Mr. Farman Ali, learned counsel for the respondents, on the other hand, has produced the record in support of the contention that the petitioner’s representation was duly considered and the petitioner was also granted a personal hearing.
4. As far as a decision to debar businesses from contracts with government or public sector undertakings is concerned, the courts have emphasized adherence to the requirement of natural justice. The recent judgment of a Coordinate Bench in Oasis Projects Ltd. vs. National Highway and Infrastructure Development , (2024) SCC OnLine Del 2549 considers the decisions of the Supreme Court inter alia in Kulja Industries Ltd. v. Western Telecom Project BSNL , (2014) 14 SCC 731 , UMC Technologies (P) Ltd. v. Food Corpn. of India, (2021) 2 SCC 551 , and of this Court in Diwan Chand Goyal v. National Capital Region Transport Corporation , W.P.(C) 3301/2020 decided on 02.09.2020, and summarises the law thus:
“29. The law on blacklisting or banning or debarring is very clear and has been fully settled by Supreme Court almost a decade ago in Kulja Industries Ltd. v. Western Telecom Project BSNL , (2014) 14 SCC 731 that blacklisting, debarring, suspension are all similar terminologies. There could be various grounds for debarment or blacklisting, in such cases the compliance of principles of natural justice is of utmost importance…….
30. Similarly, in Diwan Chand Goyal v. National Capital Region Transport Corporation , 2020 : DHC : 2685, the Court summarized all the general principles with respect to blacklisting, in the following terms:
45. Upon a reading of the aforesaid judgments cited on behalf of both the parties, the general principles, which emerge, with respect to blacklisting are;
(a) Principles of natural justice have to be complied with before the order of blacklisting is passed;
(b) Natural justice or audi alteram partem does not always require a hearing to be granted. Serving of
