Cancellation of registration of a contractor without providing an opportunity of hearing violates the principles of natural justice.

A.K. Gohil, J.

1. By this petition, under Article 226 of the Constitution of India, the petitioners are seeking quashment of Annexures P/1 and P/2, orders passed by the Chief Engineer, Public Health Engineering Department by which, he cancelled the registration of the petitioners on the ground that in the event of acceptance of their tender, they could not execute the agreement for drilling of tube-wells. Therefore, their amount of earnest money is forfeited and their registration is also cancelled.

2. The petitioners have filed this petition for challenging the action of the Respondents regarding forfeiture of earnest money as well as cancellation of registration on the ground of violation of natural justice, as no opportunity of hearing was provided before cancelling the registration. In reply, the Respondents justified their action regarding forfeiture of earnest money and cancellation of the registration of the petitioners with the Department as the contractors on the basis of provisions of Works Manual.

3. At the time of the argument, the learned counsel for the petitioners made a concession that he is not pressing the relief relating to forfeiture of earnest money but his only submission is that his registration with the Department cannot be cancelled without providing an opportunity of hearing and following the principles of natural justice as the same would amount to blacklisting the contractor for ever.

4. The only question remains before this Court for consideration is whether the registration of the petitioners can be cancelled without providing the opportunity of hearing to them in violation of the principles of natural justice.

5. Learned counsel for the petitioners relied on the decision of this Court in the case of J.K. Enterprises v. State of M.P. and Ors., reported in AIR 1997 M.P. 68, wherein it has been held that--

"Blacklisting of contractor ensures civil consequences and that is not permissible without following the principle of natural justice. The order of blacklisting having been passed without any notice or opportunity of hearing, cannot be sustained."

The petitioners also cited another decision of Supreme Court in the case of Erusian Equipment and Chemicals Ltd. v. State of West Bengal and Anr., reported in AIR 1975 Supreme Court 266, wherein it has been laid down that--

"Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist. The State which has the right to trade has also the duty to observe equality. The Government cannot choose to exclude persons by discrimination. The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality. The State can enter into contract with any person it chooses. No person has a fundamental right to insist that the Government must enter into a contract with him. A citizen has a right to claim equal treatment to enter into a contract which may be proper, necessary and essential to his lawful calling. Where the blacklisting order involves civil consequences it casts a slur. It creates a barrier between the persons blacklisted and the Government in the matter of transactions. The blacklists are "instruments of coercion". Hence a person must be given an opportunity of hearing before his name is put on the black list."

In another case of Govinda Chandra Mishra v. Superintendent, Government Ayurvedic Pharmacy,