2014 (8) TMI 1081 - SC - Indian Laws

Necessity of serving show cause notice - Form and content of show cause notice required to be served, before deciding as to whether the noticee is to be blacklisted or not - Held that - When it comes to the action of blacklisting which is termed as Civil Death it would be difficult to accept the proposition that without even putting the noticee to such a contemplated action and giving him a chance to show cause as to why such an action be not taken, final order can be passed blacklisting such a person only on the premise that this is one of the actions so stated in the provisions of NIT. No such case was set up by the respondents that by omitting to state the proposed action of blacklisting, the appellant in the show cause notice has not caused any prejudice to the appellant. Moreover, had the action of black listing being specifically proposed in the show cause notice, the appellant could have mentioned as to why such extreme penalty is not justified. It is not at all acceptable that non mentioning of proposed blacklisting in the show cause notice has not caused any prejudice to the appellant. This apart, the extreme nature of such a harsh penalty like blacklisting with severe consequences, would itself amount to causing prejudice to the appellant. We are of the view that the impugned judgment of the High Court does not decide the issue in correct prospective. The impugned order dated 11.9.2013 passed by the respondents blacklisting the appellant without giving the appellant notice thereto, is contrary to the principles of natural justice as it was not specifically proposed and, therefore, there was no show cause notice given to this effect before taking action of blacklisting against the appellant. We, therefore, set aside and quash the impugned action of blacklisting the appellant. The appeals are allowed to this extent.

Issues Involved:
1. Form and content of the show cause notice for blacklisting.
2. Compliance with principles of natural justice.
3. Requirement of specifying proposed action in the show cause notice.
4. Prejudice caused by non-mentioning of blacklisting in the show cause notice.

Issue-wise Detailed Analysis:

Form and Content of the Show Cause Notice for Blacklisting:
The central issue in the present appeals is whether a show cause notice, which is a prerequisite before blacklisting a party, must specifically mention the proposed action of blacklisting. The parties agree that serving a show cause notice is mandatory before blacklisting. However, the notice in question did not explicitly propose blacklisting, raising the question if such a stipulation is mandatory and if it can be inferred from the notice.

Compliance with Principles of Natural Justice:
The necessity of serving a show cause notice is grounded in the principles of natural justice, ensuring the person against whom action is contemplated has an opportunity to respond. The judgment references several precedents, including M/s. Erusian Equipment & Chemicals Ltd. v. State of West Bengal and Raghunath Thakur v. State of Bihar, which emphasize the requirement of serving a notice to provide an opportunity to the affected party to represent their case. The rationale is that blacklisting has severe consequences, described as "civil death," and thus necessitates adherence to principles of natural justice.

Requirement of Specifying Proposed Action in the Show Cause Notice:
The show cause notice must not only detail the imputations of breaches but also explicitly state the nature of the proposed action. This is crucial for the noticee to understand the full scope of the allegations and the potential consequences, enabling them to mount an appropriate defense. The judgment underscores that this requirement is even more critical in cases of blacklisting due to its severe implications. The High Court's view that the notice need not specifically mention blacklisting was rejected, emphasizing that the notice must clearly state the proposed penalty to fulfill the principles of natural justice.

Prejudice Caused by Non-mentioning of Blacklisting in the Show Cause Notice:
The argument that non-mentioning of blacklisting did not cause prejudice to the appellant was dismissed. The court held that had the notice specified blacklisting, the appellant could have presented arguments against such an extreme penalty or suggested mitigating circumstances. The severe nature of blacklisting itself implies prejudice if not explicitly mentioned in the notice. The judgment refers to the case of Haryana Financial Corporation v. Kailash Chandra Ahuja, which discusses the necessity of showing prejudice caused by non-compliance with procedural requirements. In this case, the omission to mention blacklisting in the show cause notice was deemed to have caused prejudice to the appellant.

Conclusion:
The Supreme Court set aside the impugned order of blacklisting the appellant, deeming it contrary to the principles of natural justice due to the lack of specific mention of blacklisting in the show cause notice. The court allowed the appeals to the extent of quashing the blacklisting order but permitted the respondents to take action after complying with procedural formalities.

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