Ms Abhishek Enterprises through Its Proprietor Abhishek Lala Alias Abhishek Sinha Vs State of Jharkhand through Its Principal Secretary Department of Home

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IN THE HIGH COURT OF JHARKHAND AT RANCHI

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W.P. (C) No. 2648 of 2021

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M/s. Abhishek Enterprises through its Proprietor Abhishek Lala @ Abhishek Sinha ..… Petitioner

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Versus

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State of Jharkhand through its Principal Secretary, Department of Home, Jail and Disaster Manager, Government of Jharkhand, Ranchi.

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The Inspector General of Prisons, Department of Home, Jail and Disaster Manager, Government of Jharkhand, Ranchi.

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The Assistant Inspector General of Prison, Government of Jharkhand, Department of Home, Jail and Disaster Manager, Ranchi.

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The Superintendent of Jail, Divisional Jail, Dhanbad

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.... Respondents

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CORAM: Hon’ble Mr. Justice Rongon Mukhopadhyay Hon’ble Mr. Justice Deepak Roshan

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For the Petitioner : M/s. Kumar Sourav Chatterjee, Kaustav Roy, Advocates For the Respondents : Mr. Shrey Mishra, A.C to A.G

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09/02.04.2024

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Per Deepak Roshan, J. Heard learned counsel for the parties.

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2. The instant application has been preferred by the petitioner for

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the following reliefs.

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(i) For Issuance of an appropriate writ in the nature of certiorari or any other appropriate writ, order or direction for quashing the Office Order dated 14.11.2017 as contained in Memo No. 4529 (Annexure-3) issued under the signature of Respondent No. 2; whereby and whereunder the petitioner has been blacklisted indefinitely without following the principles of natural justice.

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And/Or

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(ii) For issuance of an appropriate writ in the nature of certiorari or any other appropriate writ, order direction for quashing the Letter dated 20.11.2017 as contained in letter no. 2353 (Annexure-3/1) issued under the signature of the Respondent No. 4: whereby and whereunder in light of aforesaid order of blacklisting the petitioner was debarred with immediate effect.

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3. The brief fact of the case is that the petitioner is the

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proprietorship firm engaged in the business of retail trade and works

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contracting, dealing in principal commodities which includes food grain and green vegetables. An E-Tender Notice was issued online by the office of respondent no. 4 inviting bids from 11.09.2017 to 16.09.2017 for supplying of food materials at Dhanbad Jail. The foods materials were to be supplied from 01.10.2017 to 31.12.2017 at Dhanbad Jail. The petitioner duly applied in the E-Tender process; however, the respondent no. 2 vide Memo no. 4529 dated 14.11.2017 issued an office order wherein a decision of blacklisting the petitioner indefinitely from participating in any tenders on account of pendency of two criminal proceedings against the proprietor of the petitioner, has been issued. In the said order, it was indicated that two criminal cases, namely, Dhanbad P.S. Case no. 230/2012 and Dhanbad P.S. Case No. 402/2007 of I.P.C was pending adjudication against the proprietor of the petitioner owing to which a decision was to debar the petitioner from participating in any tender process.

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The specific case of the petitioner is that the decision of blacklisting was taken without giving an opportunity of hearing to the petitioner.

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4. Learned counsel for the petitioner submits that, on the one hand, the petitioner was acquitted in connection with Dhanbad P.S.Case No. 230/2012 on 19.03.2013 and so far as Dhanbad P.S. Case No. 402/2007, which was registered under Section 144/148/149/354 of I.P.C; same is pending for adjudication. He further submits that he also filed an RTI seeking information as to whether the concerned authorities were aware of the fact that the petitioner had already been acquitted in Dhanbad P.S.Case No. 230/2012 or not?. At the stage of appeal before R.T.I proceeding, he was informed the required information and the documents furnished by the respondents indicates that the credential of the concerned bidder for supply of food materials were being asked to verify and the same was done vide letter dated 16.10.2017 which indicated that two cases, the details of which has been mentioned hereinabove, were currently pending adjudication. The said information was given by the respondents after the appeal was filed under RTI Act; however, the petitioner was already acquitted in Dhanbad P.S. Case No. 230/2012.

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Learned counsel for the petitioner contended that so far as other pending criminal case is concerned; at the time of occurrence the petitioner was minor and all these facts could not be explained to the respondent for the reason that no show-cause notice was given to this petitioner.

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5. The petitioner specifically contended that prior to taking a decision to blacklist the petitioner indefinitely was taken without giving an opportunity of hearing is non-est in the eyes of law; inasmuch as, the principle of natural justice has not been followed. Further, the order of blacklisting is penal in nature; as such the act of the respondents in awarding harsh punishment of blacklisting without giving any opportunity of hearing is against the settled proposition of law; as such the impugned order as contained in Annexure-3 be quashed and set aside.

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6. Learned counsel for the respondents submits that the petitioner has changed his surname for misleading the authorities and terms and conditions were duly mentioned in E-Tender Notice, wherein at Clause-2, it was indicated that there should be all necessary documents including character certificate issued by Superintendent of Police are necessary documents. As a matter of fact, there was specific direction of Principal Secretary, Department of Home, Jail and Disaster Management, Government of Jharkhand to verify the credential of all the suppliers of material and as stated hereinabove the impugned order has been issued due to the fact that two cases were pending.

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However, learned counsel for the respondents could not dispute the fact that no show-cause notice was given to the petitioner prior to issuance of impugned order.

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7. Having heard learned counsel for the parties and after going through the documents available on record and the averments made in the respective affidavits, it is evident that the impugned order of blacklisting indefinitely has been issued without giving any showcause notice to the petitioner.

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Admittedly, the impugned order of blacklisting is penal in nature; as such issuance of the same without affording any opportunity

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of hearing and/or show-cause to the petitioner is bad in law. The law in this regard is now no more res integra that the requirement of specific show-cause notice before imposing penalty is mandatory and it is incumbent on the part of the department to state in the show-cause notice that it intended to impose the penalty of blacklisting, so as to provide adequate and meaningful opportunity to show-cause against the same.

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In this regard, reliance may be made to the case of Gorkha Security Services Vs. Government (NCT OF DELHI) and others reported in (2014) 9 SCC 105 , wherein the law has been laid down by the Hon’ble Apex Court at Paragraphs nos. 16 to 20 as under:

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“16. It is a common case of the parties that the blacklisting has to be preceded by a show-cause 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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17. Way back in the year 1975, this Court in Erusian Equipment & Chemicals Ltd. v. State of W.B., highlighted the necessity of giving an opportunity to such a person by serving a show-cause notice thereby giving him opportunity to meet the allegations which were in the mind of the authority contemplating blacklisting of such a person. This is clear from the reading of paras 12 and 20 of the said judgment. Necessitating this requirement, the Court observed thus: (SCC pp. 74-75)

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

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18. Again, in Raghunath Thakur v. State of Bihar the aforesaid principle a was reiterated in the following manner: (SCC p. 230, para 4)

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"4. Indisputably, no notice had been given to the appellant of the

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proposal of blacklisting the appellant. It was contended on behalf of the State Government that there was no requirement in the rule of giving any prior notice before blacklisting any person. Insofar as the contention that there is no requirement specifically of giving any notice is concerned, the respondent is right. 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 law. In the premises. that portion of the order directing that the appellant be placed in the blacklist in respect of future contracts under the Collector is set aside. So far as the cancellation of the bid of the appellant is concerned, that is not affected. This order will, however, not prevent the State Government or the appropriate authorities from taking any future steps for blacklisting the appellant if the Government is so entitled to do in accordance with law i.e, after giving the appellant due notice and an opportunity of making representation. After hearing the appellant, the State Government will be at liberty to pass any order in accordance with law indicating the reasons therefor. We, however, make it quite clear that we are not expressing any opinion on the correctness or otherwise of the allegations made against the appellant. The appeal is thus disposed of."

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19. Recently, in Patel Engg. Lid. v. Union of India speaking through one f of us (Jasti Chelameswar. J.) this Court emphatically reiterated the principle by explaining the same in the following manner (SCC pp. 262-63, paras 13-15)

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"13. The concept of 'blacklisting’ is explained by this Court in Erusion Equipment & Chemicals Ltd. v State of WB. as under: (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.

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14. The nature of the authority of the State to blacklist the persons was considered by this Court in the abovementioned case and took note of the constitutional provision (Article 298), which authorises both the Union of India and the States to make contracts for any purpose and to carry on any trade or business. It also authorises the acquisition, holding and disposal of property. This Court also took note of the fact that the right to make a contract includes the right not to make a contract. By definition, the said right is inherent in every person capable of entering into a contract. However, such a right either to enter or not to enter into a contract with any person is subject to a constitutional obligation to obey the command of Article. Though nobody has any right to compel the State to enter into a contract, everybody has a right to be treated equally when the State seeks to establish contractual relationships. The effect of 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

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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."

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(Erusian Equipment case, [(1975) | SCC 70], SCC p. 74, para 12)

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"298. Power to carry on trade, etc . The executive power of the Union and of each State shall extend to the carrying on of any trade or business and to the acquisition, holding and disposal of property and the making of contracts for any purpose:

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Provided that-

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(a) the said executive power of the Union shall, insofar as such trade or business or such purpose is not one with respect to which Parliament may make laws, be subject in each State to legislation by the State; and

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(b) the said executive power of each State shall, insofar as such trade or business or such purpose is not one with respect to which the State Legislature may make laws, be subject to legislation by Parliament."

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17. The Government is a Government of laws and not of men. It is true that neither the petitioner nor the respondent has any right to enter into a contract but they are entitled to equal treatment with others who offer tender or quotations for the purchase of the goods. The privilege arises because it is the Government which is trading with the public and the democratic form of Government demands equality and absence of arbitrariness and discrimination in such transactions. Hohfeld treats privileges as a form of liberty as opposed to a duty. The activities of the Government have a public element and, therefore, excluding a person from entering into a contractual relationship with the State would be to deprive such person to be treated equally with those, who are also engaged in similar activity.

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15. It follows from the above judgment in Erusian Equipment case that the decision of the State or its instrumentalities not to deal with certain persons or class of persons on account of the undesirability of entering into the contractual relationship with such persons is called blacklisting. The State can decline to enter into a contractual relationship with a person or a class of persons for a legitimate purpose. The authority of the State to blacklist a person is a necessary concomitant to the executive power of the State to carry on the trade or the business and making of contracts for any purpose, etc. There need not be any statutory grant of such power. The only legal limitation upon the exercise of such an authority is that the State is to act fairly and rationally without in any way being arbitrary-- thereby such a decision can be taken for some legitimate purpose. What is the legitimate purpose that is sought to be achieved by the State in a given case can vary depending upon various factors."

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20. Thus, there is no dispute about the requirement of serving showcause notice. We may also hasten to add that once the show-cause notice

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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 ”.

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8. The aforesaid law has been reiterated in the case of Isolatores and Isolators through its Proprietor Mrs. Sandhya Mishra Vs. Madhya Pradesh Madhya Kshetra Vidyut Vitran Co. Ltd. & Arn. reported in 2023 LiveLaw (S.C) 330 , wherein the Hon’ble Apex Court

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has held at Paragraphs nos. 20 to 22 as under:

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“20. Having given thoughtful consideration to the rival submissions and having examined the record, we are clearly of the view that the impugned order as passed by the High Court in practically denying the principal relief claimed by the appellant cannot be approved and the writ petition filed by the appellant deserves to be allowed to the extent of annulling the effect of debarment and quashing the imposition of penalty.

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21. As regards the principles of law applicable to the case, we need not elaborate on various decisions cited at the Bar. Suffice it would be to take note of the decision in UMC Technologies Private Limited (supra) wherein, the substance of the other relevant decisions has also been duly noticed by this Court while explaining the principles governing such actions of debarment/blacklisting. Therein, this Court, inter alia, underscored the requirement of specific show-cause notice and referred to the settled principles in the following terms: -

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"13. At the outset, it must be noted that it is the first principle of civilised jurisprudence that a person against whom any action is sought to be taken or whose right or interests are being affected should be given a reasonable opportunity to defend himself. The basic principle of natural justice is that before adjudication starts, the authority concerned should give to the affected party a notice of the case against him so that he can defend himself. Such notice should be adequate and the grounds necessitating action and the penalty/action proposed should be mentioned specifically and unambiguously. An order travelling beyond the bounds of notice is impermissible and without jurisdiction to that extent. This Court in Nasir Ahmad v. Custodian General, Evacuee Property, (1980) 3 SCC 1 has held that it is essential for the notice to specify the particular grounds on the basis of which an action is proposed to be taken so as to enable the noticee to answer the case against him. If these conditions are not satisfied, the person cannot be said to have been granted any reasonable opportunity of being heard.

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14. Specifically, in the context of blacklisting of a person or an entity by the State or a State Corporation, the requirement of a valid, particularised and unambiguous show-cause notice is particularly crucial due to the severe consequences of blacklisting and the stigmatisation that accrues to the person/entity being blacklisted. Here, it may be gainful to describe the concept of blacklisting and the graveness of the consequences occasioned by it. Blacklisting has the effect of denying a person or an entity the privileged opportunity of entering into government contracts. This privilege arises because it is the State who is the counterparty in government contracts and as such, every eligible person is to be afforded an equal opportunity to participate in such contracts, without arbitrariness and discrimination. Not only does

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blacklisting take away this privilege, it also tarnishes the blacklisted person's reputation and brings the person's character into question. Blacklisting also has long-lasting civil consequences for the future business prospects of the blacklisted person.

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16. The severity of the effects of blacklisting and the resultant need for strict observance of the principles of natural justice before passing an order of blacklisting were highlighted by this Court in Erusian Equipment & Chemicals Ltd. v. State of W.B., (1975) 1 SCC 70 in the following terms: (SCC pp. 74-75, paras 12, 15 & 20)

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"12. …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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15. …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".

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

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17. Similarly, this Court in Raghunath Thakur v. State of Bihar, (1989) 1 SCC 229 struck down an order of blacklisting for future contracts on the ground of non-observance of the principles of natural justice. The relevant extract of the judgment in that case is as follows: (SCC p. 230, para 4)

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"4. ... It is an implied principle of the rule of law that any order having civil consequences 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."

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18. This Court in Gorkha Security Services v. State (NCT of Delhi), (2014) 9 SCC 105 has described blacklisting as being equivalent to the civil death of a person because blacklisting is stigmatic in nature and debars a person from participating in government tenders thereby precluding him from the award of government contracts. It has been held thus: (SCC p. 115, para 16) "16. It is a common case of the parties that the blacklisting has to be preceded by a show- cause 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

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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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19. In light of the above decisions, it is clear that a prior showcause notice granting a reasonable opportunity of being heard is an essential element of all administrative decision- making and particularly so in decisions pertaining to blacklisting which entail grave consequences for the entity being blacklisted. In these cases, furnishing of a valid show-cause notice is critical and a failure to do so would be fatal to any order of blacklisting pursuant thereto."

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22. As regards maintainability of these appeals, learned counsel for the appellant has rightly referred to the decision in A.P. State Financial Corporation (supra) wherein, while dealing with an akin question about maintainability of fresh appeal, after withdrawal of the earlier one and after another round of approach to the High Court, this Court, inter alia, observed as under: -

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"6. Learned counsel for the contesting respondents have strenuously contended that the special leave petitions against the judgment of the Division Bench of the High Court in writ appeals, having been rejected by this Court, the High Court judgment has achieved finality and, as such, these appeals are liable to be dismissed on that short ground. We do not agree with the learned counsel. This Court while rejecting the petitions as withdrawn, granted liberty to the petitioner to approach the High Court and point out the case which was sought to be pleaded before this Court. In other words, this Court prima facie found the contentions of the petitioner to be plausible and, as such, granted liberty to raise the same before the High Court. The High Court heard the parties at length and passed a reasoned order running into 16 pages. In the facts and circumstances of this case, we are not inclined to agree with the learned counsel that the judgment of the High Court in writ appeals has achieved finality."

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22.1. Having regard to the above, and overall circumstances of the case we find no reason to treat the impugned order dated 23.04.2021 as final and deem it appropriate to examine the challenge on merits.

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9. Admittedly, in the instant case, the impugned order has been issued suo motu without giving any show-cause and/or opportunity of hearing to the petitioner and the same is penal in nature; as such relying upon the aforesaid judgments delivered by the Hon’ble Apex Court, we are of the considered opinion that the impugned order of blacklisting the petitioner indefinitely cannot be sustained in the eye of law and the same deserves to be quashed and aside.

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Accordingly, the impugned order dated 14.11.2017 (Annexure-

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3), is hereby, quashed and set aside. Consequently, the instant writ application stands allowed.

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(Rongon Mukhopadhyay, J.)

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(Deepak Roshan, J.)

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JK AFR

Ms Abhishek Enterprises through Its Proprietor Abhishek Lala Alias Abhishek Sinha v. State of Jharkhand through Its Principal Secretary Department of Home

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Ms Abhishek Enterprises through Its Proprietor Abhishek Lala Alias Abhishek Sinha v. State of Jharkhand through Its Principal Secretary Department of Home

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