The central legal point established in the judgment is the requirement of issuing a show cause notice and providing an adequate hearing to a contractor before cancelling their registration or blacklisting them, in accordance with the principles of natural justice.

Piyush Mathur, J.

1. The Petitioner has challenged Order Dated 30.04.2010 in the present petition, whereby the Chief Engineer of Public Health Engineering Department, Gwalior has ordered for cancellation of the Registration of the Contractor as also for Blacklisting the Petitioner.

2. Shri D. S. Raghuwanshi Learned Counsel appearing for the Petitioner submit that the Petitioner is a Class A-1 Contractor, who has been registered with the Public Health Engineering Department and has been participating in various Tenders for digging Tubewell for the Department.

3. Shri Raghuwanshi Learned Counsel for the Petitioner submit that a Departmental Enquiry was conducted against an Executive Engineer viz. Shri R.N. Karaiya wherein charges of misconduct and financial irregularities were levelled against him and while passing an adverse Order against him, all those Contractors, who were working with the Department during the tenure of Shri R. N. Karaiya, Executive Engineer, were blacklisted by the Department and their Registration as Contractor was cancelled without complying with the principles of natural justice.

4. Shri Raghuwanshi submits that the Registration of the Contractor was cancelled on the ground that incorrect document was furnished with the Department at the time of Registration and when a verification was made, the document was found to be contrary to the description given in the Application. Shri Raghuwanshi submits that the Registration as Contractor was never based on any such document and the Registration could not be cancelled on the strength of the incorrectness of the description of the documents, without issuing a show cause notice to the Petitioner.

5. Ms. Ami Prabal Learned Dy. Advocate General appearing for the State submit that in place of filing a reply to the Writ Petition, she would refer to the record of the Department to demonstrate that an enquriy was conducted against Shri R. N. Karaiya, Executive Engineer, wherein it was found that certain misconduct was committed by him, which goes to further demonstrate that he had unauthorizedly extended a variety of benefits to the Contractors working in the Department and as such it was required in all fitness of things that the Registration of the Contractor should be cancelled and his name should be blacklisted and to substantiate this submission Learned Counsel appearing for the State read over a large number of documents to demonstrate the correctness of the aforesaid contention, but could not show any document to demonstrate that at any point of time, a show cause notice was ever issued to the Petitioner before either cancelling the Registration or blacklisting the Petitioner.

6. Public Health Engineering is a Department of the State of Madhya Pradesh, which is engaged in the activity of providing technical support and developing of infrastructure, for providing water to the citizens and thus it perform statutory duties being a Department of the State. When the State deals with the individuals in the matters of contract and construction, it becomes necessary for the State to act bonafide and without any bias, while complying with the mandatory provisions of Law including the cardinal principle of natural justice. The Supreme Court of India while dealing with the case of blacklisting has observed in the case of Erusian Equipment & Chemicals Ltd. v. State of West Bengal, a Judgment reported as (1975) 1 SCC 70 in the following terms ;

19. Where the State is dealing with individuals in transactions of sales and purchase of goods, the two important factors are that an individual is entitled to trade with the Government and an individual is entitled to a fair and equal treatment with others. A duty to act fairly can be interpreted as meaning a duty to observe certain aspects of rules of natural justice. A body may be under a duty to give fair consideration to the facts and to consider the representations but not to disclose to those persons details of information in it