TaxTMI 
TaxTMI 
2020 (11) TMI 966
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....poration's office. The Appellant submitted its bid on 21.12.2016 and was eventually declared as the successful bidder vide the Corporation's letter dated 28.03.2017. After completion of the formalities, the Appellant was appointed for a period of 2 years w.e.f. 14.02.2017 for undertaking the tendered work of conducting recruitment of watchmen for the Corporation. 4. As part of its work, on 01.04.2018, the Appellant conducted a written exam for eligible aspirants for the post of watchman with the Corporation at various centres in Madhya Pradesh. On the same day, a Special Task Force of Bhopal Police arrested 50 persons in Gwalior, who were in possession of certain handwritten documents which prima facie appeared to be the question papers related to the examination conducted by the Appellant. The police filed a charge sheet on 03.08.2018 against certain persons including an employee of the Appellant. Upon receipt of the above information, the Corporation issued a show cause notice dated 10.04.2018 to the Appellant informing the Appellant about the said arrest and seizure of documents which appeared to contain question papers related to the examination conducted by the Appell....
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....13.02.2019 which is under challenge before us. 8. At the outset, it may be noted that Shri Gourab Banerji, learned Senior Counsel for the Appellant, has submitted that the Appellant only seeks to contest the issue of blacklisting and not the termination of the contract between the Appellant and the Corporation. Thus, the sole issue that falls for determination before us is whether the Corporation was entitled to and justified in blacklisting the Appellant for 5 years from participating in its future tenders. 9. Before delving into the contentions of the parties, it would be useful to extract some of the provisions of the Corporation's Bid Document dated 25.11.2016 which would be material to determining the validity of the blacklisting order dated 09.01.2019: INSTRUCTIONS TO BIDDERS XXX XXX XXX 10. DISQUALIFICATION CONDITIONS: Bidder who have been blacklisted or otherwise debarred by FCI or central/state Govt. or any central/State PSU/Statutory Corporations, will be ineligible during the period of such blacklisting. 10.1 Any Bidder whose contract with FCI or central/state Govt. or any central/State PSU/Statutory Corporations has been terminated before the expiry of the ....
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....ower of future blacklisting. It was further alleged that the said Clause was also not mentioned in the show cause notice dated 10.04.2018 issued by the Corporation. The said show cause notice was also impinged upon by the Appellant by submitting that it failed to meet the requirements of natural justice as it neither mentioned the grounds necessitating action nor specified what actions were proposed to be taken. Thus, Shri Banerji submitted that in the absence of a valid show cause notice, the consequent blacklisting order cannot be sustained. He further highlighted the outsized impact of the Corporation's impugned order on the Appellant in as much as the Corporation's branches in other States as well as other government corporations have now issued as many as 5 notices to the Appellant to cancel contracts or prevent the Appellant from participating in their tender process and have also forfeited or withheld outstanding payments and security deposits. He argued that due to the domino effect of the Corporation's blacklisting of the Appellant, the Appellant has unreasonably suffered 5 punishments at the hands of the Corporation which is disproportionate and tantamounts to....
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....ular 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. 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, particularized and unambiguous show cause notice is particularly crucial due to the severe consequences of blacklisting and the stigmatization 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 blacklisting takes away this privilege, it also tarnishes the blacklisted person's reputation and....
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.... the person concerned should be given an opportunity to represent his case before he is put on the blacklist. 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: 4.... [I]t 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. 18. This Court in Gorkha Security Services v. Government (NCT of Delhi) and Ors. (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 ten....
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....nt 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 blacklisting, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action. 22. The High Court has simply stated that the purpose of show-cause notice is primarily to enable the noticee to meet the grounds on which the action is proposed against him. No doubt, the High Court is justified to this agent, However, it is equally important to mention as to what would be the consequence if the noticee does not satisfactorily meet the grounds on which an action is proposed. To put it otherwise, we are of the opinion that in order fulfil the requirements of principles of natural justice, a show-cause notice should meet the following two requirements viz.: (i) The material/grounds....
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....o necessary to highlight the order dated 09.01.2019 passed by the Corporation in pursuant to the aforesaid notice, the operative portion of which reads as under: After having examined the entire matter in detail, the shortcomings/negligence on the part of M/s. UMC Technologies Pvt. Ltd. stands established beyond any reasonable doubt. Now, therefore in accordance with Clause 42.1(11) of the governing MTF, the competent authority hereby terminates the contract at the risk and cost of the Agency. As per Clause No. 10.1 & 10.2 the said M/s. UMC Technologies Pvt. Ltd. is hereby debarred from participating in any future tenders of the corporation for a period of Five years. Further, the Security Deposit too stands forfeited as per Clause 15.6 of MTF. This order is issued without prejudice to any other legal remedy available with FCI to safeguard its interest. 24. A plain reading of the notice makes it clear that the action of blacklisting was neither expressly proposed nor could it have been inferred from the language employed by the Corporation in its show cause notice. After listing 12 clauses of the "Instruction to Bidders", which were part of the Corporation's Bid Document dat....