Disposed

Ms Data Tech through Its Proprietor Alok Kumar Dubey v. the State of Jharkhand through Its Chief Secretary

Jharkhand HC21 Jan 2021WPC/1592/2020

Case brief

AI extract

What is this about?

A CCTV contractor challenged blacklisting, security forfeiture and withheld dues. The court quashed indefinite blacklisting without specific notice, permitting fresh action after due hearing. It declined interference with the monetary claims involving disputed facts and left other lawful remedies open.

What did the court decide?

Blacklisting quashed; authority permitted to initiate fresh blacklisting proceedings consistent with natural justice.

Ms Data Tech through Its Proprietor Alok… — Public Procurement and Tenders | Jharkhand HC (2021)

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IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P.(C) No. 1592 of 2020

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M/s Data Tech., a proprietorship concern represented through its proprietor namely Alok Kumar Dubey. ..... … Petitioner

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Versus

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The State of Jharkhand through its Chief Secretary having its office at Project Building, Dhurwa, Ranchi.

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Deputy Commissioner Lohardaga.

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Deputy Development Commissioner, Lohardaga. …. …. Respondents

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CORAM : HON’BLE MR. JUSTICE RAJESH SHANKAR

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-----For the Petitioner : Mr. Sachin Kumar, Advocate Ms. Surabhi, Advocate For the Respondents : Mr. Jagdeesh, A.C. to S.C. I --------

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04/21.01.2021 The present writ petition is taken up today through Video conferencing.

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2. The present writ petition has been filed for quashing the order as contained in memo No.220 dated 08^th June, 2020 (Annexure-23 to the writ petition) issued by the Deputy Commissioner, Lohargada-respondent no.2, whereby the petitioner has been blacklisted by forfeiting the security amount of rupees 3 Lakhs deposited by it and an order has been passed not to pay the remaining amount of Rs.9,45,000/- due against the work of installation of CCTV Surveillance system in Lohardaga Town, already done by the petitioner about three years back. Further prayer has been made for issuance of direction upon the respondents to release the remaining amount of Rs.9,45,000/- as well as the forfeited security amount of Rs.3 lakhs to the petitioner.

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3. The factual background of the case as stated in the writ petition is that the District Collectorate, Lohardaga came out with a notice inviting Expression of Interest-cum-Request for Proposal (EOI-cum-RFP) for installation of IP based CCTV Surveillance System in Lohardaga town. The petitioner participated in the said tender and deposited a sum of Rs.3 lakhs as security deposit vide demand draft no.79565 dated 20^th September, 2016 and it was made clear in the technical bid submitted by the petitioner that all the products will be under three years warranty on technical problem but physical damage or burn due to thundering will not be covered under the warranty. Altogether three tenders were received pursuant to the invitation made by the respondent no.2. The meeting of

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the District Purchase Committee, Lohardaga was held on 07^th October, 2016. The petitioner was declared successful in the said tender process and was awarded the work vide work order as contained in memo no.411 dated 21^st October, 2016 and administrative approval to the extent of Rs.46.90 lakhs was finalized by the respondent no.2 for the said purpose. The work was completed by the petitioner within the prescribed time frame and vide letter dated 13^th January, 2017 it was informed to the respondent no.2 that the work had been completed as per EOI-cum-RFP and all 72 CCTV cameras had been installed. The petitioner also requested to make payment of Rs.46.90 lakhs for completion of the work entrusted to it, however, the payment was not made. In the meantime the petitioner started providing service in terms of warranty clause of the technical bid in respect of CCTV cameras installed by it. The respondent no.2 called for a technical report regarding installation of CCTV cameras which was submitted by the District Informatics Officer, National Informatics Centre, Lohardaga vide letter no.41/NIC/17 dated 19^th December, 2017 wherein it was reported that there were 32 locations where 72 CCTV cameras were found to be installed and thereafter the payment of Rs.23.45 lakhs and Rs.14.00 lakhs was released to the petitioner against the said work vide memo no.393 dated 18^th October, 2017 and memo no.266 dated 1^st September, 2018 respectively but the rest due amount to the extent of Rs.9,45,000/- was kept pending. The petitioner repeatedly made request to the respondent-authorities to release the remaining amount as well as the amount of security deposit but all went in vein. In the meantime, an enquiry committee was constituted vide memo no.16 dated 17^th January, 2020 under the Chairmanship of the District Transport Officer, Lohardaga and the said committee submitted its report vide letter no.34 dated 22^nd January, 2020 to the effect that 32 cameras were working whereas 40 cameras were not working. The Deputy Development Commissioner, Lohardaga-respondent no.3, vide letter no.186 dated 20^th June, 2020, directed the petitioner to make all the CCTV cameras functional within ten days, failing which, on the ground of violation of Request for Proposal (RFP) as well as the work order dated 21^st October, 2016, the work would be considered as substandard and the remaining amount would not be paid by forfeiting the security deposit as well. The petitioner vide letter dated 22^nd May, 2020

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denied all the allegations and stated that all the CCTV cameras were functioning properly at the time of installation and in the report dated 19^th December, 2017 submitted by the District Informatics Officer, Lohardaga as well as the joint enquiry report of District Transport Officer, Lohardaga, Deputy Superintendent of Police (HQ), Lohardaga and District Informatics Officer, Lohardaga vide letter no.266 dated 01^st September, 2018, it was clearly mentioned that all the cameras were found as per the technical specification. It was also stated that the physical damage and theft of the CCTV cameras by the anti-social elements during rally in relation to CAA protest was not covered under warranty and as such the petitioner requested the respondent no.3 to provide all stolen and damaged items and to release the balance agreement amount, informing that all the CCTV cameras would be repaired thereafter. However, the respondent no.2 without considering the request of the petitioner, blacklisted it vide order contained in memo no.220 dated 08^th June, 2020 and its earnest money deposit of Rs.3 lakhs was forfeited, moreover the balance amount of Rs.9,45,000/- was also ordered not to be paid. Hence, the present writ petition.

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4. The learned counsel for the petitioner submits that the impugned order dated 08^th June, 2020 so far blacklisting of the petitioner for indefinite period is not sustainable in view of the settled law laid down by the Hon’ble Supreme Court and, as such, the same is liable to be quashed. It is further submitted that the petitioner was not served with any show cause notice particularly for the proposed punishment of blacklisting so as to enable it to explain the allegations. It is also submitted that the respondent no.2 has no authority to blacklist the petitioner, particularly in absence of any specific provision for the same. The petitioner had done its work in terms of EOI-cum-RFP and had completed the installation work within the time frame, however, in spite of the request made by it to the respondent authorities, 20% of the contract value has not yet been released. It is further submitted that the petitioner had duly informed about damage of camera and cables to the authorities, however, no action was taken either by the Lohardaga Police or by the respondent no.2. The petitioner is not responsible for the physical damage to the cameras or the cable during the rally in relation to CAA protest. It is also submitted that the petitioner had completed the

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work well within the restricted time, however, the respondents took one year to submit technical report for which the petitioner cannot be penalized. The nature of the damage was not covered under warranty and the petitioner is not liable for physical damage or theft of CCTVs under warranty clause. The warranty condition will be attracted only if there is some manufacturing defects or some technical defects in the CCTV cameras and physical damage caused to the cameras were out of the purview of the warranty clause of technical bid. It is further submitted that pursuant to the meeting held with the respondent no.2, the petitioner had provided the expenses which might incurr in repairing the damaged CCTV cameras or in installing new cameras in place of the stolen CCTV cameras. The respondent no.2 instead of paying the repairing charges issued show cause notice which was duly replied by the petitioner and without considering the reply of the petitioner, passed the impugned order dated 8^th June, 2020. The respondent no.2 is a party to the agreement with the petitioner and as such he had no power or authority under law to take punitive action against other party to the contract. It is also submitted that there were no defect either in CCTV cameras or in the UPS. Due to continuous power cut in different locations at Lohardaga, the battery of the UPS could not be charged and as such after getting the battery charged, the UPS were made operational. The petitioner time and again approached the respondent authorities to take the charge of CCTV cameras, however, they neither accepted it nor released the payment of the dues amount. Pursuant to invitation for EOIcum-RFP issued by the respondent no.2, the petitioner after installing the CCTV cameras, had already informed the respondent no.2 along with the challan and it was for the respondent no.2 to handover the charge of the cameras to any officer of his choice. The petitioner vide letter dated 09^th August, 2019 informed the Officer-in-Charge, Lohardaga Police Station about the damage caused to the Cable of the CCTV Cameras by the antisocial elements at certain places due to which it was not possible to received footage of those areas and also requested to take appropriate action against anti-social elements, however, neither any first information report was lodged nor any action was taken by the police. It is further submitted that after installation of the cameras by the petitioner, it was the duty of the respondent-authorities to take care of the same.

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5. Per contra, the learned counsel appearing on behalf of the respondents submits that the petitioner was required to complete the CCTV cameras installation work within four months from the date of the work order and the defect liability period/warranty on the products/CCTV cameras installed was for three years from the date of actual completion. However, the petitioner showed slow progress of work and the quality of CCTV cameras installed by it was also not up to mark. It is further submitted that the respondent no.2 provided sufficient opportunity to the petitioner to rectify the CCTV cameras installation in proper mode as per specification, however the petitioner failed to comply the order of the respondent no.2 and as such vide impugned letter dated 8^th June, 2020, the EMD was forfeited and balance amount of the said work was ordered not to be paid. An order of blacklisting the petitioner was also passed. It is also submitted that the petitioner is wrong to contend that the work was completed within the stipulated time. The Deputy Development Commissioner, Lohardaga-respondent no.3 issued letter dated 31^st December, 2016 seeking explanation from the petitioner for delay in execution of the installation work even after lapse of three months and the petitioner replied the same vide letter dated 31^st December, 2016 regretting the delay. It is further submitted that after submission of technical report by the District Informatics Officer regarding installation of the CCTV cameras by the petitioner, the Superintendent of Police, Lohardaga vide letter no. 6191 dated 25^th December, 2017 informed the respondent no.2 that out of 72 installed CCTV cameras, only 53 were found functional. It was found in the joint enquiry that out of 72 CCTV cameras, only 68 were found functional. It was further reported that on power cut, only few cameras were functional and the rest were not functional due to poor power back up. The system provided by the petitioner in the composite control room was also of sub-standard quality as fast-forward function was not available. It would be evident from the enquiry report that though the petitioner was well aware of the defects, it did not comply the instruction for removing the same. It is further submitted that a joint meeting was called by the respondent no.2 wherein a detailed discussion was made and, thereafter, necessary directions were issued to the petitioner. Every occasion the complain was made to the petitioner, it used to remove the defect temporarily and never acted upon

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to come out with some concrete solution regarding smooth functioning of the CCTV cameras. It is also submitted that if the CCTV cameras were damaged by anti-social elements, the petitioner was in a best position to explain the date and time of incident since the maintenance and CCTV camera surveillance work was done by the engineers of the petitioner itself. However, the said fact was nowhere been mentioned in the F.I.R., which clearly indicates that the petitioner, in order to shield its substandard work, submitted a vague application to the police. The respondent no.2 vide letter no.420 dated 05^th August, 2019 directed the petitioner to resolve the defects in CCTV cameras within one week and to handover the charge to the In-charge Composite Control Room, however, instead of resolving the material defects, it kept on giving unreasonable excuses. The respondent no.2 constituted a joint enquiry team of District Transport Officer, Lohardaga, Deputy Superintendent of Police (HQ), Lohardaga, Circle Officer, Lohardaga and Executive Officer, Municipal Council, Lohardaga who made physical verification of the work done by the petitioner and it would be evident from the report of the said team dated 22^nd January, 2020 that out of total 72 cameras only 32 were functional, moreover, certain defects were also found in the same. It further submitted that the balance amount of the petitioner was not released due to its sub-standard work regarding installation of CCTV cameras. The petitioner is taking shield of damage caused to CCTV cameras and cables by the anti-social elements during CAA Protest with ulterior motive, however, it would be evident that the enquiry report was submitted one day prior to the rally i.e., on 22^nd January, 2020 wherein defect in the installation work of the petitioner was already pointed whereas the rally/protest was organized on 23^rd January, 2020. It is further submitted that in view of Clause 12 of Expression of Interest-cumRequest for Proposal, the complete system was under three years warranty, after successful testing, commissioning and handing over the same to the district administration as well as defect free maintenance during the said period. Since the petitioner’s work was so defective, the District Administration had to instruct it to fulfill the conditions of EOIcum-RFP. Hence, there has been no arbitrariness and illegality on the part of the respondents.

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6. Heard the learned counsel for the parties and perused the materials

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available on record. By way of filing the preset writ petition, the petitioner has challenged the impugned order as contained in memo no.220 dated 08^th June, 2020 and has also made two more prayers. One is for releasing the amount of forfeited security deposit as well as for making payment of remaining due amount for the said work done which has been ordered not to be paid to the petitioner by the respondent no.2 and the other prayer is with regard to quashment of order of blacklisting the petitioner for an indefinite period.

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7. Before coming to the merit of the case, it would be appropriate to go through a recent judgment of the Hon’ble Supreme Court rendered in the case of Punjab National Bank and Others Versus Atmanand Singh and Others reported in 2020 SCC OnLine SC 433 wherein after discussing several earlier judgments, their Lordships have summarized the law dealing with the scope of intervention by the Writ Court in the matters involving money claim.

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“17. The appellant-Bank has rightly invited our attention to the Constitution Bench decision of this Court in ThansinghNathmal (supra). In paragraph 7, the Court dealt with the scope of jurisdiction of the High Court under Article 226 of the Constitution in the following words:—

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“7. … The jurisdiction of the High Court under Article 226 of the Constitution is couched in wide terms and the exercise thereof is not subject to any restrictions except the territorial restrictions which are expressly provided in the Articles. But the exercise of the jurisdiction is discretionary: it is not exercised merely because it is lawful to do so. The very amplitude of the jurisdiction demands that it will ordinarily be exercised subject to certain self-imposed limitations. Resort that jurisdiction is not intended as an alternative remedy for relief which may be obtained in a suit or other mode prescribed by statute. Ordinarily the Court will not entertain a petition for a writ under Article 226, where the petitioner has an alternative remedy, which without being unduly onerous, provides an equally efficacious remedy. Again the High Court does not generally enter upon a determination of questions which demand an elaborate examination of evidence to establish the right to enforce which the writ is claimed. The High Court does not therefore act as a court of appeal against the decision of a court or tribunal, to correct errors of fact, and does not by assuming jurisdiction under Article 226 trench upon an alternative remedy provided by statute for obtaining relief. Where it is open to the aggrieved petitioner to move another tribunal, or even itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit by entertaining a petition under Article 226 of the Constitution the machinery created under

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the statute to be bypassed, and will leave the party applying to it to seek resort to the machinery so set up.

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(emphasis supplied)

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Similarly, another Constitution Bench decision in Suganmal (supra) dealt with the scope of jurisdiction under Article 226 of the Constitution. In paragraph 6 of the said decision, the Court observed thus:—

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“6. On the first point, we are of opinion that though the High Courts have power to pass any appropriate order in the exercise of the powers conferred under Article 226 of the Constitution, such a petition solely praying for the issue of a writ of mandamus directing the State to refund the money is not ordinarily maintainable for the simple reason that a claim for such a refund can always be made in a suit against the authority which had illegally collected the money as a tax. … We do not find any good reason to extend this principle and therefore hold that no petition for the issue of a writ of mandamus will be normally entertained for the purpose of merely ordering a refund of money to the return of which the petitioner claims a right.”

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(emphasis supplied)

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And again, in paragraph 9, the Court observed as follows:—

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“9. We therefore hold that normally petitions solely praying for the refund of money against the State by a writ of mandamus are not to be entertained. The aggrieved party has the right of going to the civil court for claiming the amount and it is open to the State to raise all possible defences to the claim, defences which cannot, in most cases, be appropriately raised and considered in the exercise of writ jurisdiction.”

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(emphasis supplied)

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In Smt. GunwantKaur (supra) relied upon by the respondent No. 1, in paragraph 14, the Court observed thus:—

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“14. The High Court observed that they will not determine disputed question of fact in a writ petition. But what facts were in dispute and what were admitted could only be determined after an affidavit in reply was filed by the State. The High Court, however, proceeded to dismiss the petition in limine. The High Court is not deprived of its jurisdiction to entertain a petition under Article 226 merely because in considering the petitioner's right to relief questions of fact may fall to be determined. In a petition under Article 226 the High Court has jurisdiction to try issues both of fact and law. Exercise of the jurisdiction is, it is true, discretionary, but the discretion must be exercised on sound judicial principles. When the petition raises questions of fact of a complex nature, which may for their determination require oral evidence to be taken, and on that account the High Court is of the view that the dispute may not appropriately be tried in a writ petition, the High Court may decline to try a petition. Rejection of a petition in limine will normally be justified, where the High Court

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is of the view that the petition is frivolous or because of the nature of the claim made dispute sought to be agitated, or that the petition against the party against whom relief is claimed is not maintainable or that the dispute raised thereby is such that it would be inappropriate to try it in the writ jurisdiction, or for anologous reasons.”

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(emphasis supplied)

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We restate the above position that when the petition raises questions of fact of complex nature, such as in the present case, which may for their determination require oral and documentary evidence to be produced and proved by the concerned party and also because the relief sought is merely for ordering a refund of money, the High Court should be loath in entertaining such writ petition and instead must relegate the parties to remedy of a civil suit. Had it been a case where material facts referred to in the writ petition are admitted facts or indisputable facts, the High Court may be justified in examining the claim of the writ petitioner on its own merits in accordance with law.

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In the case of Joshi Technologies International Inc. Vs. Union of India and others reported in (2015) 7 SCC 728 the Hon’ble Supreme Court held as under:- 69.3. If there are very serious disputed questions of fact which are of complex nature and require oral evidence for their determination.

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69.4. Money claims per se particularly arising out of contractual obligations are normally not to be entertained except in exceptional circumstances.

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8. In the aforesaid case, the Hon’ble Supreme Court after citing various earlier judgments has held that a writ petition cannot be maintained merely for the reason that refund of money has been claimed against the State as the said claim can always be made by filing a civil suit. When the refund of money is claimed by filing a writ petition and the question of facts as raised is complex in nature requiring production of documents and leading of evidences, the High Court must relegate the parties to the remedy of a civil suit. However, in case of admitted facts, the High Court may grant relief to the petitioner by examining the case on its own merit.

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9. Reverting back to the present case. The claim of the petitioner is that the work of installation of CCTV cameras was done by it within the stipulated time strictly as per the terms and conditions of the contract. It is also claimed that the respondents failed to take charge of the said installed CCTV cameras and in the meantime some of the installed CCTV cameras and cables were damaged by anti-social elements during the CAA/NRC protest which was duly reported by the petitioner to the police, however, no action was taken on the said information, rather the

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payment of the work done by it has been kept pending and amount of security deposit has been forfeited. Learned counsel for the petitioner has contended that the petitioner cannot be penalized for the fault of the respondent-authorities. The warranty is not covered for the damage caused to the product by anti-social elements and as such the petitioner was not under obligation to repair/replace it.

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10. On the other hand, the case of the respondents is that the petitioner had not completed the work within the stipulated time and the installed CCTV cameras were of sub-standard quality. The enquiry report submitted by the joint inspection team revealed that on physical verification, many cameras were not found installed at the site.Moreover, on power cut, some of the cameras could not function due to no/poor back up of UPS provided by the petitioner. It is claimed that repeated directions were issued to the petitioner to remove the defects. A show cause notice was also issued to the petitioner specifically mentioning the defects with a direction to make all the cameras functional within ten days. The petitioner submitted the reply but failed to remove the defects and as such decision was taken not to pay the remaining amount by forfeiting the security deposit and also to blacklist the petitioner. 11. In view of the aforesaid facts, it appears that there are allegations and counter allegations by the petitioner and the respondents against each other. In the case in hand, both the parties have raised question of facts in support of their respective contention which is complex in nature and hence cannot be decided in writ jurisdiction. It is not the case where the dues claimed by the petitioner is an admitted one, rather the respondents have claimed that the CCTV cameras installed by the petitioner was of sub-standard quality and several defects were found in the work done by the petitioner. In spite of the repeated direction to the petitioner, the same were not cured which resulted in passing the impugned order. Had the claim of the petitioner been based on undisputed facts, this court would have exercised the extraordinary jurisdiction to direct the respondents to release the payment of the petitioner. However from the facts of the case, as aforesaid, it is found that determination of the claim of the petitioner, requires leading of evidences on its behalf which is possible only before a fact finding court. As such, I am of the considered view that the petitioner has failed to

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show an exceptional circumstance so as to invoke extraordinary writ jurisdiction for quashing the order of the respondent no.2 to the extent of forfeiture of the security deposit and dues amount more so when the same is purely based on factual allegations.

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12. So far the order of blacklisting is concerned, it would be appropriate to go through the law laid down by the Hon’ble Supreme Court in the matter of blacklisting of a contractor at the instance of the State/its instrumentalities.

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13. In the case of Kulja Industries Limited Vs. Chief General Manager, Western Telecom Project BSNL and Others reported in (2014) 14 SCC 731 , the Hon’ble Supreme Court has held as under:-

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“17. That apart, the power to blacklist a contractor whether the contract be for supply of material or equipment or for the execution of any other work whatsoever is in our opinion inherent in the party allotting the contract. There is no need for any such power being specifically conferred by statute or reserved by contractor. That is because “blacklisting” simply signifies a business decision by which the party affected by the breach decides not to enter into any contractual relationship with the party committing the breach. Between two private parties the right to take any such decision is absolute and untrammelled by any constraints whatsoever. The freedom to contract or not to contract is unqualified in the case of private parties. But any such decision is subject to judicial review when the same is taken by the State or any of its instrumentalities. This implies that any such decision will be open to scrutiny not only on the touchstone of the principles of natural justice but also on the doctrine of proportionality. A fair hearing to the party being blacklisted thus becomes an essential precondition for a proper exercise of the power and a valid order of blacklisting made pursuant thereto. The order itself being reasonable, fair and proportionate to the gravity of the offence is similarly examinable by a writ court.

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18. The legal position on the subject is settled by a long line of decisions rendered by this Court starting with Erusian Equipment & Chemicals Ltd. v. State of W.B. where this Court declared that blacklisting has the effect of preventing a person from entering into lawful relationship with the Government for purposes of gains and that the authority passing any such order was required to give a fair hearing before passing an order blacklisting a certain entity. This Court observed: (SCC p. 75, para 20)

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“20. 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

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opportunity to represent his case before he is put on the blacklist.”

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Subsequent decisions of this Court in Southern Painters v. Fertilizers & Chemicals Travancore Ltd.; Patel Engg. Ltd. v. Union of India; B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd.; Joseph Vilangandan v. Executive Engineer (PWD) among others have followed the ratio of that decision and applied the principle of audialterampartem to the process that may eventually culminate in the blacklisting of a contractor.

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19. Even the second facet of the scrutiny which the blacklisting order must suffer is no longer res integra. The decisions of this Court in Radha Krishna Agarwal v. State of Bihar; E.P. Royappa v. State of T.N.; Maneka Gandhi v. Union of India; Ajay Hasia v. Khalid MujibSehravardi; RamanaDayaramShetty v. International Airport Authority of India and Dwarka Das Marfatia and Sons v. Port of Bombay have ruled against arbitrariness and discrimination in every matter that is subject to judicial review before a writ court exercising powers under Article 226 or Article 32 of the Constitution.

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20. It is also well settled that even though the right of the writ petitioner is in the nature of a contractual right, the manner, the method and the motive behind the decision of the authority whether or not to enter into a contract is subject to judicial review on the touchstone of fairness, relevance, natural justice, non-discrimination, equality and proportionality. All these considerations that go to determine whether the action is sustainable in law have been sanctified by judicial pronouncements of this Court and are of seminal importance in a system that is committed to the rule of law. We do not consider it necessary to burden this judgment by a copious reference to the decisions on the subject. A reference to the following passage from the decision of this Court in Mahabir Auto Stores v. Indian Oil Corpn.should, in our view, suffice: (SCC pp. 760-61, para 12)

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“12. 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 Radha Krishna Agarwal v. State of Bihar. … 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 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

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contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. … 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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25. Suffice it to say that “debarment” is recognized and often used as an effective method for disciplining deviant suppliers/contractors who may have committed acts of omission and commission or frauds including misrepresentations, falsification of records and other breaches of the regulations under which such contracts were allotted. What is notable is that the “debarment” is never permanent and the period of debarment would invariably depend upon the nature of the offence committed by the erring contractor.”

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14. In the case of Gorkha Security Services Vs. Government (NCT of Delhi) and Others reported in (2014) 9 SCC 105 , the Hon’ble Supreme Court has held as under:-

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“16. It is a common case of the parties that the blacklisting has to be preceded by a showcause notice. Law in this regard is firmly grounded and does not even demand much amplification. The necessity of compliance with the principles of natural justice by giving the opportunity to the person against whom action of blacklisting is sought to be taken has a valid and solid rationale behind it. With blacklisting, many civil and/or evil consequences follow. It is described as “civil death” of a person who is foisted with the order of blacklisting. Such an order is stigmatic in nature and debars such a person from participating in government tenders which means precluding him from the award of government contracts.”

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15. In the aforesaid judgments, the Hon’ble Supreme Court has held that when a contract is entered between two private parties, then in case of any breach by one party, the other party has every right to blacklist the defaulter and such right is unqualified. However, in a situation where an order of blacklisting has been passed by the State or its instrumentalities, then such order is within the realm of power of judicial review of the Writ Court and the same has to be tested in the touchstone of the principles of natural justice, doctrine of proportionality, reasonableness and fairness. The order of blacklisting has the effect of depriving a person of equality

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of opportunity in the matter of public contract. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the government/government agencies for the purposes of gains. Thus, before taking such a harsh decision, the person concerned should be given an opportunity to represent his case before he is put on the blacklist. The show cause should not be mere formality, rather the same should specifically mention the grounds according to which the department necessitates the action and also the proposed action so that the person aggrieved may explain the circumstances properly.

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16. On perusal of the show cause issued to the petitioner vide memo no.186 dated 20^th June, 2020, it appears that the same was issued to it directing to make all the CCTV cameras functional within ten days, otherwise remaining due amount would not be paid by forfeiting the security deposit. The proposed action of blacklisting was not mentioned in the said show cause notice and, thus, it appears that the respondent no.2 passed the impugned order of blacklisting suo moto without providing any opportunity of hearing to the petitioner on the said issue. Though, the learned counsel for the respondent-State has tried to justify the said order, however, has failed to controvert the specific contention of the petitioner that the impugned order has been passed without serving any show cause to the petitioner on the said aspect. It is a settled proposition of law that before passing the order of blacklisting, it is sine qua non to hear the delinquent so as to enable it to satisfy as to whether the default is intentional or has been caused under the situation beyond one’s control. The State or its instrumentality while dealing with any private individual, is required to exercise the said discretion in fair and equitable manner. Moreover, the order of blacklisting against the petitioner is without specifying any duration of blacklisting and, thus, appears to be permanent in nature which is in violation of the law laid down in Kulja Industries Limited (Supra).

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17. In view of the aforesaid legal and factual position, the impugned order as contained in memo no.220 dated 08^th June, 2020 passed by the respondent no.2 is quashed to the extent of blacklisting of the petitioner for an indefinite period. The said authority is however at liberty to take fresh steps towards blacklisting/debarment of the petitioner following the

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principles of natural justice and in the light of the discussions made hereinabove. So far as the order of forfeiture of security amount of Rs.3 lakhs and payment of the balance agreement amount of Rs.9,45,000/are concerned, the petitioner is at liberty to take appropriate recourse against the same as permissible under law.

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18. The writ petition is disposed of with the aforesaid observations.

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(Rajesh Shankar, J.)

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Rohit/AFR

Ms Data Tech through Its Proprietor Alok Kumar Dubey v. the State of Jharkhand through Its Chief Secretary

Case brief

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Ms Data Tech through Its Proprietor Alok Kumar Dubey v. the State of Jharkhand through Its Chief Secretary

Case brief

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What did the court decide?

What the court decided

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