2020 (11) TMI 966 - SC - Indian Laws

Seeking to terminate a contract of service with the Appellant - seeking to blacklist the Appellant from participating in any future tenders of the Corporation for a period of 5 years - HELD THAT - This Court in Gorkha Security Services v. Government (NCT of Delhi) and Ors. 2014 (8) TMI 1081 - SUPREME COURT 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 that 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. In the present case, the factum of service of the show cause notice dated 10.04.2018 by the Corporation upon the Appellant is not in dispute. Rather, what Shri Banerji has argued on behalf of the Appellant is that the contents of the said show cause notice were not such that the Appellant could have anticipated that an order of blacklisting was being contemplated by the Corporation - Gorkha Security Services is a case where this Court had to decide whether the action of blacklisting could have been taken without specifically proposing/contemplating such an action in the show-cause notice. A clear legal position emerges that for a show cause notice to constitute the valid basis of a blacklisting order, such notice must spell out clearly, or its contents be such that it can be clearly inferred therefrom, that there is intention on the part of the issuer of the notice to blacklist the noticee. Such a clear notice is essential for ensuring that the person against whom the penalty of blacklisting is intended to be imposed, has an adequate, informed and meaningful opportunity to show cause against his possible blacklisting. 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 dated 25.11.2016, the notice merely contains a vague statement that in light of the alleged leakage of question papers by the Appellant, an appropriate decision will be taken by the Corporation. In fact, Clause 10 of the same Instruction to Bidders Section of the Bid Document, which the Corporation has argued to be the source of its power to blacklist the Appellant, is not even mentioned in the show cause notice. While the notice clarified that the 12 clauses specified in the notice were only indicative and not exhaustive, there was nothing in the notice which could have given the Appellant the impression that the action of blacklisting was being proposed. This is especially true since the Appellant was under the belief that the Corporation was not even empowered to take such an action against it and since the only Clause which mentioned blacklisting was not referred to by the Corporation in its show cause notice - mere existence of a Clause in the Bid Document, which mentions blacklisting as a bar against eligibility, cannot satisfy the mandatory requirement of a clear mention of the proposed action in the show cause notice. The Corporation's notice is completely silent about blacklisting and as such, it could not have led the Appellant to infer that such an action could be taken by the Corporation in pursuance of this notice. Had the Corporation expressed its mind in the show cause notice to black list, the Appellant could have filed a suitable reply for the same. Therefore, the show cause notice dated 10.04.2018 does not fulfil the requirements of a valid show cause notice for blacklisting. The blacklisting order passed by the Corporation is contrary to the principles of natural justice - Having regard to the peculiar facts and circumstances of the present case, it is deemed appropriate not to remit the matter to the Corporation for fresh consideration - appeal allowed.

Summary

Issues Involved:
1. Validity of the blacklisting order.
2. Adequacy of the show cause notice.
3. Compliance with principles of natural justice.

Detailed Analysis:

1. Validity of the Blacklisting Order:
The Supreme Court examined whether the Food Corporation of India (FCI) was justified in blacklisting the Appellant for five years. The Court noted that the blacklisting order dated 09.01.2019 was issued following the alleged leakage of question papers during an examination conducted by the Appellant. The Court emphasized that blacklisting has severe consequences, including tarnishing the reputation of the blacklisted entity and precluding it from participating in future government contracts. The Court reiterated that blacklisting must be supported by a valid show cause notice and compliance with principles of natural justice.

2. Adequacy of the Show Cause Notice:
The Court scrutinized the show cause notice dated 10.04.2018 issued by FCI. It highlighted that the notice must clearly specify the grounds necessitating action and the proposed penalty, ensuring the noticee has a reasonable opportunity to defend themselves. The Court found that the show cause notice in question did not explicitly mention the possibility of blacklisting, nor could it be inferred from the language used. The notice contained a vague statement about taking an appropriate decision without specifying that blacklisting was being contemplated. The Court held that the absence of a clear mention of blacklisting in the show cause notice rendered it invalid for the purpose of supporting the subsequent blacklisting order.

3. Compliance with Principles of Natural Justice:
The Court underscored the importance of adhering to principles of natural justice, particularly in cases involving blacklisting due to its severe consequences. It cited precedents emphasizing that any administrative decision, especially one involving blacklisting, must be preceded by a valid show cause notice providing a reasonable opportunity for the affected party to present their case. The Court concluded that the failure to explicitly mention blacklisting in the show cause notice deprived the Appellant of an adequate opportunity to defend against the proposed action, thus violating principles of natural justice.

Conclusion:
The Supreme Court allowed the appeal, setting aside the High Court's order dated 13.02.2019 and quashing the FCI's blacklisting order dated 09.01.2019. The Court held that the blacklisting order was contrary to principles of natural justice due to the inadequacy of the show cause notice. The parties were directed to bear their own costs.