2024 (10) TMI 1492 - HC - GST

Cancellation of sale order - forefeiture of security deposit - petitioner s firm is debarred from participating in any online Forward Auction conducted by RSP for a period of six months - HELD THAT - This Court finds that the black listing period has already been over, but there is forfeiture of Security Deposit as well as Performance Guarantee made by the petitioner, which has been done without complying the principle of natural justice. Therefore, the same cannot be sustained in the eye of law. In M/S KULJA INDUSTRIES LIMITED VERSUS CHIEF GEN. MANAGER WT. PROJ. BSNL OTHERS 2013 (10) TMI 733 - SUPREME COURT , the apex Court held, if State or its instrumentality takes decision on blacklisting then such decision is subject to judicial review on grounds of principles of natural justice, doctrine of proportionality, arbitrariness and discrimination under Article 14 of the Constitution of India. This Court is of the opinion that the order dated 26.06.2023 under Annexure-22 cannot be sustained in the eye of law and is liable to be quashed and is hereby quashed - Petition allowed by way of remand.

Summary

Issues:
1. Validity of the order cancelling the Sale Order and forfeiting the Security Deposit.
2. Compliance with the principles of natural justice in the decision-making process.
3. Applicability of blacklisting and forfeiture of guarantees without due process.

Analysis:

The petitioner filed a writ petition seeking to quash an order cancelling the Sale Order and forfeiting the Security Deposit based on the terms of an Online Forward Auction. The petitioner argued that the cancellation was due to undisclosed conditions at the site, rendering the work unworkable. The petitioner contended that the forfeiture and debarment were unjust as the opposite parties failed to disclose crucial information. The petitioner also alleged a violation of the principle of natural justice in the decision-making process.

The opposite parties argued that if there was a breach of natural justice, the petitioner should have approached the relevant authority for appropriate action. The Court, after hearing both sides, found that while the blacklisting period had ended, the forfeiture of the Security Deposit and Performance Guarantee was unjust as it did not comply with the principle of natural justice. The Court referenced legal precedents to support the requirement of following principles of natural justice in such cases.

Citing cases like Kulja Industries Limited v. Chief General Manager and Nova Steel (India) Ltd v. M.C.D. And Ors, the Court emphasized that decisions on blacklisting must adhere to principles of natural justice, proportionality, and non-arbitrariness. The Court also referred to TELSA Transformers Limited v. Odisha Power Transmission Corporation Limited to highlight the necessity of providing notice and an opportunity to be heard before imposing penalties.

Consequently, the Court quashed the impugned order and remitted the matter back to the concerned party to pass an appropriate order within four months in compliance with the principle of natural justice. The writ petition was disposed of accordingly, emphasizing the importance of due process and fairness in administrative decisions.