2022 (9) TMI 1604 - HC - Indian Laws

Premature challenge to SCN - Challenge to notice whereby the petitioner had been directed to show cause in respect of a proposed action of blacklisting/debarment - HELD THAT - The maintainability of a writ petition against a show cause notice was subject matter of consideration in the case of Siemens Ltd. 2006 (12) TMI 203 - SUPREME COURT wherein it was held that ordinarily a writ court may not exercise its discretionary jurisdiction in entertaining a writ petition questioning a notice to show cause unless it is without jurisdiction; however, when a notice is issued with premeditation, writ petition would be maintainable. The question as to what would be the proper contents of a notice to show cause, so as to be in consonance with the principles of natural justice was considered in the case of Oryx Fisheries 2010 (10) TMI 660 - SUPREME COURT and it was observed that the notice directing show cause must state the charges only and not definite conclusions of alleged guilt otherwise the entire proceeding would stand vitiated by unfairness and bias. The scope of judicial review in matters relating to challenge to show-cause notice was subject matter of consideration in UNION OF INDIA VERSUS VICCO LABORATORIES 2007 (11) TMI 21 - SUPREME COURT , and while holding that non-interference at the stage of issuance of show-cause notice is the normal rule, it was stated that where a show-cause notice is issued either without jurisdiction or in an abuse of process of law, the writ court would not hesitate to interfere even at the stage of issuance of show-cause notice. In Union of India and others Vs. Coastal Container Transporters Association and others 2019 (2) TMI 1497 - SUPREME COURT , while examining the scope of powers under Article 226 with regard to quashment of a show-cause notice, it was held that the same would not be permissible unless there is lack of jurisdiction or violation of principles of natural justice. The power to blacklist a contractor was held to be inherent in the party allotting the contract and the freedom to contract or not to contract was held to be unqualified in the case of private parties; however when the party is State, the decision to blacklist would be open judicial review on touchstone of proportionality and the principles of natural justice. It is legally well settled that mere issuance of show cause notice does not amount to an adverse order, which may be held to affect the rights of the parties. The necessity for issuing a show cause notice and the requirement of specifying the grounds on which the action is proposed is in fact a necessary prerequisite, so as to ensure that the noticee is aware of the grounds on which action is proposed and has an adequate opportunity to rebut the same. If the show cause notice does not specifically state the grounds on which it is being issued and the proposed action, the noticee would be taken by surprise and would not have adequate opportunity to rebut the allegations during the course of inquiry which is to follow. The challenge to the show cause notices in the instant petitions is premature for the reason that the mere indication of the grounds and the penalty proposed, would not give rise to a cause of action, as it is open to the petitioners to present their case and rebut the imputations, whereupon it would be incumbent upon the respondent authority to proceed with the inquiry and pass an appropriate speaking and reasoned order after giving adequate opportunity to the petitioners and ensuring due compliance of the principles of natural justice. The challenge raised to the show cause notices, at this stage, is premature - Petition disposed off.

Issues Involved:
1. Premature Challenge to Show Cause Notices
2. Allegations of Prejudgment and Bias
3. Principles of Natural Justice
4. Validity of Show Cause Notices
5. Judicial Review of Show Cause Notices

Issue-wise Detailed Analysis:

1. Premature Challenge to Show Cause Notices:
The petitions challenge the notices dated 18.6.2022 which direct the petitioners to show cause regarding proposed blacklisting/debarment. The respondents argue that the petitions are premature as the notices merely call for a response to charges and no final decision has been made.

2. Allegations of Prejudgment and Bias:
The petitioners contend that the notices are premeditated and issued with malice, citing that the notices are based on incorrect and incomplete facts, and conceal the issuance of earlier notices. They argue that the tenor of the notices indicates a predetermined decision to blacklist them, rendering the exercise an empty formality. The petitioners rely on precedents such as Siemens Ltd. vs. State of Maharashtra and Oryx Fisheries Pvt. Ltd. vs. Union of India to support their claims of prejudgment and bias.

3. Principles of Natural Justice:
The respondents assert that the notices comply with principles of natural justice, providing specific details of alleged breaches to enable the petitioners to respond. They emphasize that the notices were issued with an open mind and that a decision will only be made after considering the petitioners' responses. The respondents cite Gorkha Security Services vs. Government (NCT of Delhi) to argue that a show cause notice must state the grounds and proposed action to fulfill natural justice requirements.

4. Validity of Show Cause Notices:
The court examines the validity of the show cause notices, referencing multiple precedents. It is noted that a valid show cause notice must spell out the imputations, specify the alleged breaches, and indicate the proposed action to ensure that the noticee has an adequate opportunity to rebut the allegations. The court references decisions such as Union of India vs. Vicco Laboratories and UMC Technologies Private Ltd. vs. Food Corporation of India, which emphasize the necessity of detailed and unambiguous show cause notices, especially in cases involving blacklisting.

5. Judicial Review of Show Cause Notices:
The court discusses the scope of judicial review in matters relating to show cause notices, citing cases like Union of India vs. Coastal Container Transporters Association and Malladi Drugs and Pharma Ltd. vs. Union of India. It is held that judicial review is permissible if a show cause notice is issued without jurisdiction or in abuse of process of law. However, mere issuance of a show cause notice does not amount to an adverse order affecting the rights of the parties.

Conclusion:
The court concludes that the challenge to the show cause notices is premature. It is open to the petitioners to rebut the allegations in their responses, and the respondent authority must consider these responses before making a decision. The court emphasizes that the principles of natural justice require a fair hearing and an opportunity for the petitioners to present their case. The petitions are disposed of with directions for the petitioners to submit their responses within two weeks, and for the respondent authority to conclude the proceedings within a further two weeks, ensuring due consideration of the petitioners' defenses and passing reasoned and speaking orders.

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