In a recent legal case, the High Court delved into the intricacies of procedural justice in the context of blacklisting individuals from participating in government tenders. The case revolved around the validity of a blacklisting order issued by a government corporation, emphasizing the significance of adherence to principles of natural justice in such matters. The court’s legal analysis shed light on the crucial role of clear show cause notices and specified grounds in blacklisting decisions, highlighting the need for fairness and transparency in administrative actions.
Facts
- Appellant conducted a written exam for watchman post on 01.04.2018.
- 50 persons in possession of possible leaked question papers were arrested in Gwalior.
- Appellant denied negligence in letter dated 12.04.2018.
- Requested documents seized by police for forensic analysis.
- Submitted Observation Report-cum-Reply/Explanation on 27.10.2018.
- Corporation issued show cause notice about arrest and seizure of documents on 10.04.2018.
- Appellant contended dissimilarities between seized documents and original question papers.
- The High Court dismissed the writ petition and upheld the validity of the order to terminate the appellant’s contract and blacklist them from future tenders.
- The order was passed by respondent no.1, the Food Corporation of India, through its Deputy General Manager (Personnel).
- The termination and blacklisting was for a period of 5 years.
- The Corporation had issued a Bid Document in 2016 for recruitment of watchmen.
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Issue
- The issue at hand is whether the Corporation was justified in blacklisting the appellant for 5 years from participating in its future tenders.
- The Corporation’s Bid Document dated 25.11.2016 outlines disqualification conditions related to blacklisting or termination of contracts for breach of terms and conditions within the last five years.
- The Bid Document specifies that bidders blacklisted or debarred by FCI, central/state Govt., central/State PSU/Statutory Corporations are ineligible during the period of blacklisting.
- Bidders whose contracts with FCI, central/state Govt., or central/State PSU/Statutory Corporations have been terminated for breach of terms within the last five years are also deemed ineligible.
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Arguments
- The appellant, represented by Shri Banerji, argued against the Corporation’s power to blacklist them as per the Bid Document.
- Shri Banerji highlighted the severe consequences faced by the appellant due to blacklisting by the Corporation.
- Shri Ajit Pudussery, representing the Corporation, emphasized the negative impact of the appellant’s negligence on the recruitment process and public confidence.
- Shri Gourab Banerji clarified that the appellant challenges the blacklisting and not the contract termination.
- The appellant raised concerns about the lack of proper grounds and actions specified in the show cause notice issued by the Corporation.
- Shri Banerji contended that without a valid show cause notice, the blacklisting order cannot be upheld.
- The blacklisting order was made as per the Bid Document
- The appellant was granted ample time to reply to the show cause notice before the blacklisting order was issued
- The Corporation’s blacklisting order dated 09.01.2019 cannot be challenged
- The appellant breached the terms of the contract by leaking question papers for the examination
- It was argued that it was not in public interest to permit the appellant to participate in future tenders due to the breach
- The possibility of blacklisting as a punishment was clearly provided for in the Bid Document
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Analysis
- Any corrupt practice during recruitment process will lead to immediate cancellation of the contract and legal action.
- FCI has the right to terminate the contract if the bidder breaches any terms or conditions.
- Bidders who have forfeited deposits in the last five years for breach of terms are ineligible.
- The requirement of stating the action proposed to be taken is crucial in a show-cause notice.
- Blacklisting is a severe action with long-lasting consequences on business prospects and reputation.
- The notice should clearly state the grounds for action and the penalty proposed.
- A person must be given a reasonable opportunity to defend themselves before any adverse action is taken.
- Failure to provide a clear show-cause notice can render any subsequent blacklisting order invalid.
- The notice should enable the party to understand the case against them and defend accordingly.
- A blacklisting order deprives a person of equality of opportunity in public contracts.
- The severity of blacklisting necessitates strict adherence to principles of natural justice.
- The show-cause notice should mention the intention to blacklist expressly or inferably.
- The notice in this case did not clearly propose blacklisting as a potential action.
- It is essential to provide the noticee with an opportunity to refute allegations before any punitive action is taken.
- Contents of show cause notice are essential in blacklisting cases
- Show cause notice must specify particular grounds for action
- Failure to provide show cause notice violates principles of natural justice
- Blacklisting has severe consequences and is stigmatic in nature
- Blacklisting deprives a person/entity from participating in government tenders
- Blacklisting order must comply with principles of natural justice
- Blacklisting akin to civil death as it restricts future business opportunities
- The blacklisting order dated 09.01.2019 passed by the Corporation was deemed contrary to the principles of natural justice.
- The notice from the Corporation did not mention blacklisting, leaving the appellant unaware that such an action could be taken.
- The show cause notice dated 10.04.2018 was found to be insufficient for blacklisting as it did not fulfill the requirements of a valid show cause notice.
- The order blacklisting the appellant exceeded the bounds set by the show cause notice, which is not allowed by law.
- The consequent blacklisting order dated 09.01.2019 was deemed unsustainable and could not be upheld.
Decision
- Pending applications disposed of.
- Order dated 09.01.2019 quashed in part regarding blacklisting appellant from future tenders.
- Appeal allowed, order dated 13.02.2019 set aside.
- Parties to bear their own costs.
Case Title: UMC TECHNOLOGIES PRIVATE LTD. Vs. FOOD CORPORATION OF INDIA (2020 INSC 643)
Case Number: C.A. No.-003687-003687 / 2020
