2017 (10) TMI 1655 - HC - Indian Laws

Violation of principles of natural justice - no reason for passing the impugned order - reply of the petitioner given to the show cause notice not considered - Extension of contract period and subsequent termination - blacklisting in the agreement executed between the petitioner and the opposite party - HELD THAT - It is clear that the impugned order has been passed without assigning any reason and also without considering the reply of the petitioner given to the show cause notice. Blacklisting - HELD THAT - It is admitted by the opposite party that there was no provision of blacklisting, either in the tender call notice, or in the agreement. However, the apex Court in the case of M/s. Kulja Industries Limited 2013 (10) TMI 733 - SUPREME COURT has in paragraph 17 held that there was no need for any such power being specifically conferred by statute or reserved by contractor because blacklisting simply signifies a business decision by which the party affected by the breach decides not to enter into any contractual relationship with the party committing the breach. In Maneka Gandhi v. Union of India, 1978 (1) TMI 161 - SUPREME COURT the apex Court observed that the reasons, if disclosed, being open to judicial scrutiny for ascertaining their nexus with the order, the refusal to disclose the reasons would equally be open to the scrutiny of the court; or else, the wholesome power of a dispassionate judicial examination of executive orders could, with impunity, be set at naught by an obdurate determination to suppress the reasons. As the opposite party had extended the period of the agreement, without there being any request so made by the petitioner and without expressing its discontent or dissatisfaction with regard to the working of the petitioner, it is opined that after the period of contract had expired, the passing of the impugned order, in the manner as has been done in the present case, cannot be justified. Petition allowed.

Summary

Issues:
1. Extension of contract period and subsequent termination.
2. Blacklisting of the petitioner.
3. Validity of reasons provided for termination and blacklisting.

Analysis:
1. The petitioner won a contract to provide security guards, which was extended by the respondent without a request. However, the respondent later issued a show-cause notice for alleged violations and terminated the agreement, blacklisting the petitioner. The petitioner argued that no blacklisting provision existed in the agreement or tender notice and that the termination lacked specific reasons or consideration of their response.

2. The petitioner contended that the termination lacked specific violations mentioned and was based on general grounds without proper justification. The respondent argued that blacklisting could be done based on a business decision, citing a legal precedent. However, the court noted that the respondent failed to provide valid reasons for termination and blacklisting, especially after extending the contract without prior complaints.

3. The court emphasized the importance of providing valid reasons for administrative decisions, citing legal precedents. It highlighted that reasons serve as a link between facts and conclusions, ensuring fairness and judicial scrutiny. Failure to disclose reasons could undermine the judicial examination of executive orders. The court quashed the termination order, emphasizing that decisions must be based on valid reasons and proper consideration of responses.

4. The judgment concluded by allowing the writ petition, quashing the termination order, but allowing the respondent to take appropriate actions in compliance with the law. No costs were awarded in this matter. The court's decision was based on the lack of valid reasons provided for termination and blacklisting, especially after the contract extension without prior issues raised by the respondent.