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IN THE COURT OF MADURAI BENCH OF MADRAS HIGH
J. NISHA BANU, S. SRIMATHY, JJ.
Muthupandeeswari, Proprietor, M/s.Muthupandeeswari Modern Rice Mill - Appellant
Versus
The Managing Director, Tamil Nadu Civil Supplies Corporation and Anr. – Respondents
W.A.(MD).No.665 of 2025 and C.M.P.(MD).No.4706 & 4708 of 2025
Decided On : 29-04-2025
Advocates Appeared :
For the Appellant : Mrs. N. Krishnaveni, Senior Counsel, For M/s. S.Sakthi Siddharth.
For the Respondents : Mr. R.Baskaran, AAG, Assisted by Mr. Satheesh, Standing Counsel.
(A) Constitution of India - Article 19(1)(g) - Principles of Natural Justice - Blacklisting of appellant rice mill without notice or hearing - The appellant challenged the blacklisting order imposed by the 2nd respondent, which was based on mere allegations and without proper enquiry, violating principles of natural justice. The court emphasized that blacklisting is a severe penalty requiring adherence to due process and fair hearing. (Paras 14, 25, 28)
(B) Arbitration - Jurisdiction of High Court - The court examined whether the arbitration clause in the agreement could oust the jurisdiction of the High Court under Article 226, especially in cases of blacklisting that are arbitrary and disproportionate. (Paras 22, 26)
Facts of the case:
The appellant, a rice mill, was blacklisted by the 2nd respondent after an enquiry regarding missing paddy bags, without providing an opportunity for a hearing or issuing a notice. The appellant denied receiving the paddy and challenged the blacklisting order. (Paras 4-10)
Findings of Court:
The court found that the blacklisting order was arbitrary and violated the principles of natural justice, necessitating a fresh enquiry with proper notice and opportunity for the appellant to present their case. (Paras 29, 30)
Issues: The main issues included whether the blacklisting was justified without a hearing and whether the arbitration clause could limit the High Court's jurisdiction. (Paras 22, 26)
Ratio Decidendi: The court ruled that blacklisting requires adherence to natural justice principles, including the right to a fair hearing, and that the High Court retains jurisdiction in cases of arbitrary actions. (Paras 25, 28)
Result: Writ appeal allowed; blacklisting order quashed.
JUDGMENT :
J. NISHA BANU, J.
This Writ Appeal is filed as against the order dated 17.02.2025 passed in W.P.(MD).3829 of 2025, wherein, the writ court referred the dispute to the sole arbitrator for adjudication of the matter relating to the blacklisting of the appellant rice mill by the 2nd respondent.
2. The Appellant is M/s.Muthupandeeswari Modern Rice Mill. The Appellant is an authorized hulling agent with the Tamil Nadu Civil Supplies Corporation (hereinafter referred to 'TNCSC') from the year 2007 through an agreement for the period of 5 years which was lastly renewed on 29.07.2020. The 2nd respondent is an authorized person responsible for allotting and supplying paddy to the mills. The appellant used to receive paddy from the 2nd respondent based on monthly allotments, determined by eligibility criteria and issued through "Delivery Orders." Upon receipt of the paddy, the appellant issued a "Paddy Acknowledgment Receipt" through TNCSC contract carriers. A monthly paddy input register and a monthly check card are maintained at the mills, and the said register and check card must be verified, checked, and duly signed by the offices of the 1st and 2nd respondents every month.
3. The 2nd respondent is the TNCSC Regional Office in Madurai. This office procures paddy from other regions and stores it in the godown at Kadachanenthal, Madurai. From there, the paddy is supplied to rice mills by issuing memos.
4. In the present case, a lorry bearing registration number TN28AD4476 was entrusted by the Paramakudi Regional Office on 20.03.2024 to transport 400 bags of paddy to the 2nd respondent’s godown. However, the consignment never reached the 2nd respondent’s office. The lorry owner later claimed that his driver delivered the 400 bags to the appellant’s mill and sought her signature for acknowledgment. The appellant denied receiving the paddy bags and refused to sign, as she had never received the said consignment. She immediately alerted and formally informed the 2nd respondent about this on 07.05.2024.
5. While so, on 05.06.2024, the 2nd respondent sent a notice to the appellant, calling for an explanation regarding the missing 400 bags of paddy and requesting the production of the monthly chart relating to the receipt of paddy. The appellant submitted a reply on 08.06.2024, along with the monthly chart duly verified and signed by the officials of the 2nd respondent. The paddy input register for the month of March 2024 clearly shows that it was verified and signed by the 2nd respondent on 06.04.2024, and it confirms that no paddy was received by the appellant on 20.03.2024.
6. Subsequently, on 14.08.2024, an enquiry was instituted by the 1st respondent to investigate the missing paddy. During the enquiry, the appellant denied having received the paddy. However, without issuing notice or providing an opportunity of hearing, the 1st respondent passed an order dated 04.10.2024, forfeiting a sum of Rs. 4,41,000/- towards the value of the 400 missing bags of paddy. This order was based on the enquiry report dated 12.09.2024, which found the appellant at fault for allegedly receiving the paddy, as the delivery memo was signed by her staff member, Rohini. The 1st respondent also directed the 2nd respondent to blacklist the appellant in accordance with Clause 12 of the agreement dated 29.07.2020.
7. Thereafter, the 2nd respondent, without issuing any notice or affording an opportunity of hearing, blacklisted the appellant. This action was challenged in W.P.(MD) No. 24403 of 2024, which was dismissed. Subsequently, the appellant filed a writ appeal in W.A.(MD) No. 2359/2024. The Division Bench of this Hon’ble Court partly allowed the appeal and directed the 2nd respondent to provide the appellant an opportunity to file objections with relevant documents, to conduct a proper enquiry, and pass a reasoned order within four weeks.
8. Despite the above directions, the enquiry committee report dated 12.09.2024, which forms the basis of the impugned bl
Blacklisting without notice or hearing violates principles of natural justice and is subject to judicial review under Article 226 of the Constitution.
Blacklisting without a hearing violates principles of natural justice; orders must be reasoned and fair.
The penalty of blacklisting must be proportionate to the offense and should not be imposed arbitrarily.
The main legal point established in the judgment is the importance of following the principles of natural justice, particularly fair opportunity of hearing, before taking actions with civil consequen....
The principles of natural justice must be adhered to in administrative proceedings affecting civil rights; failure to provide a fair hearing invalidates the resulting orders.
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