1. Petitioner has filed this writ petition challenging the order dated 13.4.2022 (Annexure P-1) by which respondent No.3 has blacklisted the petitioner for a period of three years and forfeited the security amount deposited by petitioner.
2. Facts of the case, in brief, are that petitioner was awarded the contract for supply of crude ayurvedic medicine, plants and herbs to respondent Chhattisgarh Medical Services Corporation Ltd. for the year 2019-20 and accordingly, an agreement was entered into between the petitioner and respondent No.2 on 8.1.2021. As per agreement, the contract is for a period of one and half year, which may extend for a further period of six months. Thereafter, respondent Corporation issued as many as five purchase orders to the petitioner for supply of products mentioned therein. Petitioner failed to supply the contracted products within stipulated period of time as a result a show-cause notice was issued calling upon petitioner to explain as to why petitioner should not be blacklisted and why security amount should not be forfeited as petitioner failed to comply with Conditions No.5 & 7 of the tender. Petitioner submitted reply to show-cause notice explaining the circumstances for non-supply of products in time. Respondent No.2 vide order impugned blacklisted the petitioner for a period of three years and forfeited the amount deposited by petitioner as security deposit.
3. Learned counsel for the petitioner submits that due to lock-down, in the wake of second wave of Covid-19 pandemic, the petitioner was not in a position to supply products ordered by respondent Corporation as the same went out of stock from the market. Ascribing acute shortage of products in the market due to Covid-19 pandemic situation, petitioner intimated respondent Corporation about his inability to supply certain products, which are required by them, and requested to cancel the purchase orders. Instead of showing sympathetic consideration and considering the case of petitioner on humanitarian ground, respondent No.2 issued show cause notice dated 29.1.2022 calling upon the petitioner to show-cause as to why petitioner should not be blacklisted and why security amount deposited should not be forfeited. He submits that as per Clause 24 of the agreement entered between petitioner and respondent No.2, in case of any dispute between the parties, all possible efforts has to be made to resolve the dispute amicably. Respondent No.2 without taking any step for amicable settlement of dispute has straight away issued notice of blacklisting to petitioner. Therefore, petitioner preferred writ petition bearing WPC No.819/2022 which came to be disposed of along with other connected writ petitions on 14.2.2022 directing petitioner herein to file response to show-cause notice and in turn, respondent Corporation authorities were directed to consider the same in an objective manner. Thereafter, petitioner submitted detailed reply to show-cause notice explaining reason for non-supply of the products mentioned in purchase order. Petitioner has categorically pleaded that supply and availability of products mentioned in purchase order as also in the list of accepted items was badly affected due to spread of second wave of Covid-19 and therefore, petitioner could not be able to discharge the obligation undertaken in the agreement. Petitioner has also shown his willingness to supply four items out of total five items mentioned in purchase order. However, respondent No.2 vide order impugned blacklisted the petitioner for a period of three years and also forfeited the security amount deposit.
4. Learned counsel for petitioner further submits that petitioner could not be faulted for non-supply of products in time which was due to spread of corona virus across the country after issuance of purchase order by respondent No.2. The order of blacklisting passed by respondent No.3 is without proper notice and a non-speaking order as no reason is assigned for not accepting the explanation offered by the petitioner and it only mentions that reply to show-cause notice submitted by petitioner is unsatisfactory being contrary to the terms of tender. He submits that the order which results in civil consequences must be a reasoned order assigning detailed reasons for taking such course and reasons for not accepting the explanation submitted by the concerned person. Since the impugned order of blacklisting is absolutely non-speaking and does not assign any reason for rejecting the cause shown by petitioner in reply, which shows total non-application of mind by respondent No.2 to submissions made by petitioner, it could not stand the scrutiny of law and it is liable to be quashed. In the alternative, it is contended by learned counsel for the petitioner that period of blacklisting be reduced to the period already undergone.
5. On the other hand, learned counsel for respondent Corporation opposing submissions of learned counsel for petitioner, submits that the show cause notice issued to petitioner gives reasons why the petitioner is to be blacklisted. Reply filed by the petitioner was duly considered but was not found satisfactory and the petitioner was found guilty of breaching Clause Nos. 5 & 7 of the terms and conditions of tender as he failed to make supply of products in time. As the petitioner failed to make out any ground in the reply which would justify his action, in pursuance of which impugned order was passed after compliance of the principles of natural justice, the action of respondent Corporation in blacklisting petitioner cannot be faulted. He submits that respondent No.3 was not required to give reasons while blacklisting the petitioner as due opportunity was granted to the petitioner in observance of principles of natural justice and therefore, the order of blacklisting cannot be interfered on the ground that it does not contain the reasons.
6. I have heard learned counsel for the parties and perused the documents available in record.
7. Petitioner in this writ petition is aggrieved from the order dated 13.4.2020, Annexure P-1, by which petitioner is blacklisted for a period of three years and security amount is forfeited. In the aforementioned facts of case, it is necessary to first see whether principles of natural justice are followed or not while passing the order of blacklisting and whether there is any arbitrariness in decision making process.
8. In response to NIT dated 1.6.2019 issued by respondent No.2, petitioner submitted bid and was declared successful. Agreement between petitioner and respondent No.2 was executed on 12.1.2021 and thereafter purchase order was issued on 22.5.2022 for supply of Nishoth, Saunf, Jeera Syah, Gud, Ajwain Desi, which were to be used for manufacturing ayurvedic drugs. As per pleadings in writ petition, purchase order was received by petitioner only on 17.6.2021. Vide letter dated 21.6.2021 petitioner informed respondent No.2 that due to current situation of the market petitioner is unable to supply the goods ordered for. On petitioner's failure to supply any of goods mentioned under the purchase order, respondent No.2 issued show-cause notice dated 29.1.2022 to petitioner calling upon him to explain as to why petitioner be not blacklisted and why security amount be not forfeited. Reason for proposed action to be taken against petitioner is also specifically mentioned i.e. non-supply of goods under the purchase order within 60 to 90 days.
9. Indisputably, the NIT as also agreement entered between the petitioner and respondent No.2 was for supply of crude ayurvedic drugs for a period of one & half year. In the month of May, 2022 respondent No.2 issued purchase order to petitioner and petitioner was obliged to supply the goods under the purchase order within 60 to 90 days. Considering the date on which purchase order was issued and the time fixed in the NIT for supply of crude ayurvedic drugs, the plea taken by the petitioner that due to pandemic Covid-19 situation, he could not be able to supply the goods under the purchase order, cannot be a proper excuse when the supply is of crude ayurvedic drugs and to be used for manufacturing of drugs.
10. Perusal of the impugned order would show that respondent No.2 granted additional time for submission of reply to show cause notice and in the extended period, reply was submitted in which petitioner has not made any request for personal hearing. Respondent No.2 considered reply of petitioner and found the reasons assigned therein to be unsatisfactory and not acceptable in view of the terms of the contract. It further recorded that non-supply of crude ayurvedic drugs has caused obstruction in manufacturing of Ayush medicines.
11. Hon'ble Supreme Court in case of Gorakha Security Services v. Government (NCT of Delhi) & ors, reported in (2014) 9 SCC 105 has clarified as to what would be the contents of show-cause notice so as to comply with principles of natural justice. It was observed as under:-
“21.The Central issue, however, pertains to the requirement of stating the action which is proposed to be taken. The fundamental purpose behind the serving of Show Cause Notice is to make the noticee understand the precise case set up against him which he has to meet. This would require the statement of imputations detailing out the alleged breaches and defaults he has committed, so that he gets an opportunity to rebut the same. Another requirement, according to us, is the nature of action which is proposed to be taken for such a breach. That should also be stated so that the noticee is able to point out that proposed action is not warranted in the given case, even if the defaults/ breaches complained of are not satisfactorily explained. When it comes to black listing, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action.
22. The High Court has simply stated that the purpose of show cause notice is primarily to enable the noticee to meet the grounds on which the action is proposed against him. No doubt, the High Court is justified to this extent. However, it is equally important to mention as to what would be the consequence if the noticee does not satisfactorily meet the grounds on which an action is proposed. To put it otherwise, we are of the opinion that in order to fulfil the requirements of principles of natural justice, a show cause notice should meet the following two requirements viz:
i) The material/ grounds to be stated on which according to the Department necessitates an action;
ii) Particular penalty/action which is proposed to be taken. It is this second requirement which the High Court has failed to omit.
We may hasten to add that even if it is not specifically mentioned in the show cause notice but it can be clearly and safely be discerned from the reading thereof, that would be sufficient to meet this requirement.”
12. In the case of UMC Technologies Private Limited vs. Food Corporation of India & another, reported in (2021) (2) SCC 551, Hon'ble Supreme Court taking note of its earlier decision in Gorakha Security Services (supra), has observed thus:-
“21.Thus, from the above discussion, 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.”
13. From the above decisions, it is clear that requirement under the law is that action proposed against noticee and reasons for proposed action should be mentioned in the show cause notice. Perusal of show-cause notice issued to petitioner would show that it clearly mentions the proposed action of blacklisting and forfeiture of security deposit. From further perusal of show-cause notice it is apparent that proper opportunity was granted to the petitioner to meet out the proposed actions to be taken against him. In the above circumstances, in the considered opinion of this Court, the principles of natural justice are duly followed in present case.
14. So far as arbitrariness in the decision making process of respondent No.2 is concerned, under Clause 7 of the terms and conditions forming part of the tender document, it is provided that in case of any defect/slackness in execution of the contract by the successful bidder, the Corporation shall have the rights to terminate the contract and blacklist said firm for specified period.
15. Considering the entirety of facts and circumstances of case, period in which purchase order was placed to petitioner, nature of goods to be supplied by petitioner i.e. crude ayurvedic drugs to be used for manufacturing Ayush medicines, I do not find any arbitrariness in the decision making process of the respondents.
16. For the foregoing discussions, writ petition being sans merit is liable to be and is hereby dismissed.
17. With respect to submission of learned counsel for the petitioner that blacklisting period of three years is too harsh, the Hon'ble Supreme Court has held that blacklisting is in the nature of penalty and therefore, the period for which contractor is to be blacklisted rests primarily with the authority competent to impose the same. In the case of Kulja Industries Ltd. v. Chief General Manager, BSNL, reported in AIR 2014 SC 9, has observed thus:-
“26. The next question then is whether this Court ought to itself determine the time period for which the appellant should be blacklisted or remit the matter back to the authority to do so having regard to the attendant facts and circumstances. A remand back to the competent authority has appealed to us to be a more appropriate option than an order by which we may ourselves determine the period for which the appellant would remain blacklisted. We say so for two precise reasons. Firstly, because blacklisting is in the nature of penalty the quantum whereof is a matter that rests primarily with the authority competent to impose the same. In the realm of service jurisprudence this Court has no doubt cut short the agony of a delinquent employee in exceptional circumstances to prevent delay and further litigation by modifying the quantum of punishment but such considerations do not apply to a company engaged in a lucrative business like supply of optical fibre/HDPE pipes to BSNL. Secondly, because while determining the period for which the blacklisting should be effective the respondent-Corporation may for the sake of objectivity and transparency formulate broad guidelines to be followed in such cases. Different periods of debarment depending upon the gravity of the offences, violations and breaches may be prescribed by such guidelines. While, it may not be possible to exhaustively enumerate all types of offences and acts of misdemeanour, or violations of contractual obligations by a contractor, the respondent-Corporation may do so as far as possible to reduce if not totally eliminate arbitrariness in the exercise of the power vested in it and inspire confidence in the fairness of the order which the competent authority may pass against a defaulting contractor.”
18. Considering the aforementioned facts of the case and decision of Hon'ble Supreme Court, this Court reserves liberty with the petitioner to approach the authorities concerned of respondent Corporation availing Clause 24 (4) of the general conditions of contract forming part of NIT, for redressal of his grievance with respect to period of blacklisting.
19. Certified copy as per rules.
