M/S. Rajesh Enterprises Vs State of U.P. and 3 Others

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Court No. - 4

Case :- WRIT - C No. - 5860 of 2020

Petitioner :- M/S. Rajesh Enterprises Respondent :- State Of U.P. And 3 Others Counsel for Petitioner :- Nancy Kesarwani,Mukesh Prasad(Senior Adv.) Counsel for Respondent :- C.S.C.

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Hon'ble Bala Krishna Narayana,J. Hon'ble Prakash Padia,J.

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Instructions produced by the learned Standing Counsel before us in the form of a written narrative, are taken on record.

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Heard Sri Mukesh Prasad, learned Senior Counsel assisted by Ms. Nancy Kesarwani, learned counsel for the petitioner and learned Standing Counsel for respondents-State.

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The petitioner has preferred the present writ petition challenging the order passed by the respondent No.2/District Magistrate, Kaushambi dated 14.01.2020, copy of which is appended as Annexure 1 to the writ petition. A further prayer was made to issue a writ of certiorari quashing the notice dated 09.12.2019 issued by the respondent No.3/Additional District Magistrate (Finance and Revenue), Kaushambi.

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Facts in brief as contained in the writ petition are that as per New Government Policy-2017, a Government order for settlement of lease under Chapter-IV by e-tender/e-auction dated 14.8.2017 was issued. Mining leases were to be granted as per the procedure prescribed under the statutory Rules and the Government Order dated 14.8.2017. In pursuance of the same, a notice dated 25.10.2017 was issued by the respondent No.2 for settlement of mining leases of sand and morrum under the Amended Rules, 2017 in the District Kaushambi for several mining blocks by e-tendering.

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The petitioner after completing necessary formalities, submitted an application for the grant of mining lease for mining area in Khand

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No.15/43 to 15/44, measuring 24.28 hectare situate in Village Mahewa, Tehsil Manjhanpur, District Kaushambi for a quantity of 3,60,000 cubic meters per year. In this regard, the petitioner has given a bid of Rs.291 per cubic meters which being the highest. The same was duly accepted by the District Magistrate, Kaushambi/respondent No.2 and thereafter, a letter of intent dated 30.12.2017 was issued to the petitioner. After issuance of aforesaid letter of intent, he deposited a sum of Rs.5,23,80,000/- (Five Crore Twenty Three Lacs and Eighty Thousand Only), i.e., as security and first installment and thereafter applied for mining plan. Subsequently, a lease deed was executed and registered in favour of the petitioner on 18.01.2019 for the period of five years, i.e., 15.01.2019 to 14.01.2024.

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It is contended in paragraph 11 of the writ petition that the petitioner submitted an application on 22.02.2019 before the respondent No.2. It is stated in the application that there is insufficient quantity of sand in his mining area, due to this he was unable to pay the installment and prayed for re-assessment of quantity of sand in his mining area and to amend the royalty/bid amount payable by him. It is further contended that when no action was taken on the same, the petitioner sent a reminder on 25.02.2019. On 25/26.05.2019 generation of One Time Password (in short “O.T.P.”) was stopped in respect of all the lease-holders throughout the State. On 30.05.2019, the petitioner submitted another application before the Principal Secretary, Geology and Mining, Lucknow stating therein that the quantity of minerals was not available and O.T.P. was stopped on 26.05.2019 and the petitioner has deposited the amount more than the amount for which he carried out mining. It is also contended that the petitioner has also deposited amount of Rs.50,00,000/- on 30.03.2019. It is contended that in view of the order of N.G.T. dated 25.09.2019, the respondent No.2 passed order dated 03.10.2019 suspending the mining operations including the petitioner.

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Demand notices dated 13.11.2019 and 09.12.2019 were issued by the Additional District Magistrate (Finance and Revenue) Kaushambi by

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which the petitioner was directed to deposit a sum of Rs.4,73,80,000/towards second and third installments. It is contended that in the notice dated 09.12.2019, it is mentioned that the notice dated 09.12.2019 was issued on the order dated 06.12.2019 passed by the District Magistrate, Kaushambi/respondent No.2 but the order dated 06.12.2019 was never served upon the petitioner. It is further contended that in the notice dated 09.12.2019, there is no whisper regarding black listing of the petitioner. It is contended that without giving any opportunity of hearing, the respondent No.2 passed the order dated 14.01.2020 cancelling the mining lease and black listing the petitioner for two years.

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It is contended by learned counsel for the petitioner that the order impugned passed by the respondent No.2 is arbitrary, unjust, illegal and liable to be set aside by this Court due to following reasons :-

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(i) No opportunity of personal hearing was given to the petitioner before passing the order impugned by which not only the lease of the petitioner was cancelled, his security amount was forfeited but he has also been blacklisted for two years.

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(ii) The show cause notice was issued to the petitioner by Additional District Magistrate (Finance and Revenue), Kaushambi but the order impugned has been passed by the District Magistrate.

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(iii) Nothing has been stated in the show cause notices regarding blacklisting of the petitioner but in the impugned order, the petitioner was also blacklisted without giving any opportunity of hearing as such the order of blacklisting passed against the petitioner is in complete violation of principles of natural justice.

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On the other hand, it is contended by learned Standing Counsel, that since terms and conditions contained in the lease deed were violated by the petitioner, therefore, the action was rightly taken by the respondent No.2. It is further contended by her that the order impugned in the present writ petition is absolutely perfect and valid order does not warrant any

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interference specially under Article 226 of the Constitution of India.

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Heard learned counsel for the parties and perused the record. With the consent of learned counsel for the parties, this writ petition is disposed of finally at the admission stage itself.

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From perusal of the record it is clear that before passing the impugned order no opportunity of personal hearing was given to the petitioner. It is also clear from perusal of the record that notices were issued by the Additional District Magistrate (Finance and Revenue) Kaushambi but the impugned order was passed by the respondent No.2, i.e. District Magistrate Kaushambi. Apart from the same, it is also clear that although nothing is contained in the show cause notice regarding factum of blacklisting of the petitioner but while passing the order impugned, the petitioner was also blacklisted for a period of two years.

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The order impugned is in two parts:-

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(i) recovery against the petitioner

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(ii) blacklisting of the petitioner for two years.

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Insofar as the first part is concerned, it is clear from the record that the notices were issued to the petitioner by the Additional District Magistrate (Finance and Revenue) Kaushambi but the order was passed by District Magistrate Kaushambi, in this view of the matter, we are of the opinion that the order passed by the District Magistrate Kaushambi is in complete violation of principles of natural justice.

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Insofar as the blacklisting of the petitioner is concerned, From perusal of the impugned order, we find that the respondents have proceeded on the basis of a show cause notice. Nothing has been stated in the show cause notice regarding blacklisting of the petitioner. Learned Standing Counsel has not been able to refute this fact on record. In our opinion, the issue which was not raised even in the show cause notice, therefore, could not be made the basis for blacklisting of the petitioner.

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The central issue, however, pertains to the requirement of stating the action which is proposed to be taken. The fundamental purpose behind the serving of show cause notice is to make the noticee understand the precise case set up against him which he has to meet. This would require the statement of imputations detailing out the alleged breaches and defaults he has committed, so that he gets an opportunity to rebut the same. Another requirement, according to us, is the nature of action which is proposed to be taken for such a breach. That should also be stated so that the noticee is able to point out that proposed action is not warranted in the given case, even if the defaults/ breaches complained of are not satisfactorily explained. When it comes to black listing, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action. In the case of Gorkha Security Services Vs. Government (NCT of Delhi) and others (2014) 9 SCC 105, the Supreme Court was pleased to hold that it is incumbent on the part of the department to state in show cause notice that the competent authority intended to impose such a penalty of blacklisting, so as to provide adequate and meaningful opportunity to show cause against the same. Relevant paragraph namely paragraph 27 of the aforesaid judgement is quoted below:-

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“27. We are, therefore, of the opinion that it was incumbent on the part of the Department to state in the show cause notice that the competent authority intended to impose such a penalty of blacklisting, so as to provide adequate and meaningful opportunity to the appellant to show cause against the same. However, we may also add that even if it is not mentioned specifically but from the reading of the show cause notice, it can be clearly inferred that such an action was proposed, that would fulfill this requirement. In the present case, however, reading of the show cause notice does not suggest that noticee could find out that such an action could also be taken. We say so for the reasons that are recorded hereinafter.”

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In the case of Erusian Equipment & Chemicals Ltd. Vs. State of West Bengal (1975) 1 SCC 70, it was held by the Supreme Court that blacklisting has the affect of preventing a person from the privilege and advantage of name into relationship with the Government for purpose of

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aim. It was held by the Supreme Court in the aforesaid case that the fundamentals of fair play require that a person concerned should be given an opportunity to represent his case. Paragraphs 12 and 20 of the said judgment is quoted below :-

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"12. Under Article 298 of the Constitution the executive power of the Union and the State shall extend to the carrying on of any trade and to the acquisition, holding and disposal of property and the making of contracts for any purpose. The State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. 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 is on the approved list is unable to enter into advantageous relations with the Government because of the order of blacklisting. 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.

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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."

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16. Again in the case of Raghunath Thakur Vs. State of Bihar [(1989) 1

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SCC 229] the aforesaid principles was reiterated in the following manner: (SCC p. 230, para 4).

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"4. ........ But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the principles of natural justice. It has to be realised that blacklisting any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order. In that view of the matter, the last portion of the order insofar as it directs blacklisting of the appellant in respect of future contracts, cannot be sustained in

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law.........."

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Thus, there is no dispute about the requirement of serving showcause notice. We may also hasten to add that once the show-cause notice is given and opportunity to reply to the show-cause notice is afforded, it is not even necessary to give an oral hearing. The High Court has rightly repudiated the appellant's attempt in finding foul with the impugned order on this ground. Such a contention was specifically repelled in Patel Engg. [Patel Engg. Ltd. v. Union of India, (2012) 11 SCC 257 : (2013) 1 SCC (Civ) 445]."

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In the case of M/s Mahabir Auto Stores & Ors. Vs. Indian Oil Corporation Ltd. (1990) 3 SCC 752 it was held by the Supreme Court that arbitrariness and discrimination in every matter is subject to judicial review. Paragraph 11 of the aforesaid judgement is quoted below :-

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“It is well settled that every action of the State or an instrumentality of the State in exercise of its executive power, must be informed by reason. In appropriate cases, actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution. Reliance in this connection may be placed on the observations of this Court in M/s Radha Krishna Agarwal & Ors. v. State of Bihar & Ors., [1977] 3 SCC 457.1t appears to us, at the outset, that in the facts and circumstances of the case, the respondent-company IOC is an organ of the State or an instrumentality of the State as contemplated under Article 12 of the Constitution. The State acts in its executive power under Article 298 of the Constitution in entering or not entering in contracts with individual par- ties. Article 14 of the Constitution would be applicable to those exercises of power. Therefore, the action of State organ under Article 14 can be checked. M/s Radha Krishna Agarwal v. State of Bihar, (supra) at p. 462, but Article 14 of the Constitution cannot and has not been construed as a charter for judicial review of State action after the contract has been entered into, to call upon the State to account for its actions in its manifold activities by stating reasons for such actions. In a situation of this nature certain activities of the respondent company which constituted State under Article 12 of the Constitution may be in certain circumstances subject to Article 14 of the Constitu- tion in entering or not entering into contracts and must be reasonable and taken only upon lawful and relevant consideration, it depends upon facts and circumstances of a particular transaction whether heating is necessary and reasons have to be stated. In case any right conferred on the citizens which is sought to be interfered, such action is subject to Article 14 of the Constitution, and must be reasonable and can be taken only upon lawful and relevant grounds of public interest. Where there is arbitrariness in State action of this type of entering or not entering into contracts, Article 14 springs up and judicial review strikes such an action down. Every action of the

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State executive authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, in such monopoly or semi-monopoly dealings, it should meet the test of Article 14 of the Constitution. If a Governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. In this connection reference may be made to E.P. Royappa v. State of Tamil Nadu & Anr., [1974] 4 SCC 3; Maneka Gandhi v. Union of India & Anr., [1976] 1 SCC 248; Ajay Hasia & Ors. v. Khalid Mujib Sehravardi & Ors., [1981] 1 SCC 722; R.D. Shetry v. International Airport Authority of India & Ors., [1979] 3 SCC 1 and also Dwarkadas Marlaria and sons v. Board of Trustees of the Port of Bombay, [1989] 3 SCC 293. It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and nondiscrimination in the type of the transactions and nature of the dealing as in the present case.”

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Since in the facts of the present case, there is a complete failure to follow due process, we find ourselves unable to sustain the order dated 14.01.2020 passed by the respondent No.2.

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We accordingly allow the writ petition and quash the the order dated 14.01.2020. We further clarify that in case the respondents do choose to initiate fresh proceedings against the petitioner, we leave it open to them to do so subject to the observation that the proceedings if initiated shall be undertaken in accordance with law and the observations appearing herein above.

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Order Date :- 24.02.2020 saqlain

M/S. Rajesh Enterprises v. State of U.P. and 3 Others

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M/S. Rajesh Enterprises v. State of U.P. and 3 Others

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