2009 (1) TMI 903 - HC - Indian Laws

Court quashes debarment order, stresses natural justice principles, emphasizes right to challenge contract cancellation

R.K. ASSOCIATES Versus THE MANAGING DIRECTOR, IRCTC & ANR.

The Court quashed the order debarring the petitioner from future projects for two years, emphasizing the importance of principles of natural justice. It ... - Issues involved: Challenge to cancellation of catering service license and debarment from future tender processes.Cancellation of License: The petitioner challenged the cancellation of the catering service license by the respondents, IRCTC, contending that the order was unsustainable and arbitrary, based on assumptions without proper enquiry. The petitioner refuted the allegations in the show cause notice, arguing that the order was issued without due process.Debarment from Future Tenders: The petitioner raised concerns regarding being debarred from future tender processes without being given an opportunity to respond to this specific point in the show cause notice. It was argued that this aspect was unsustainable in law, citing the decision in Erusian Equipment & Chemicals -vs- State of West Bengal.Contractual Disputes: The respondents argued that the disputes were contractual in nature and not suitable for writ proceedings under Article 226. They highlighted Clause 7.12 of the Terms and Conditions, which allowed for termination of the license and debarment from future projects in case of violations by the contractor.Judicial Intervention: The Court noted that contractual disputes involving disputed questions of fact should be addressed through civil court or arbitration, as per precedents like State of U.P. v. Maharaja Dharmander Prasad Singh and others. However, the Court found merit in the petitioner's argument regarding lack of reflection in the show cause notice about the possibility of debarment for two years, emphasizing the importance of principles of natural justice.Principles of Natural Justice: The Court emphasized the need for adherence to principles of natural justice, citing previous judgments like Grosons Pharmaceuticals (P) Ltd. v. State of U.P. and B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. It highlighted that even in cases where automatic application of norms is prescribed, show cause notice and opportunity to be heard are essential.Quashing of Debarment Order: The Court quashed the order debarring the petitioner from future projects for two years, citing the necessity of following principles of natural justice. It reserved all rights and contentions of the parties, allowing the petitioner to challenge the cancellation of the contract before the Civil Court.