1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 27TH DAY OF NOVEMBER, 2018 BEFORE THE HON' BLE MR. JUSTICE B. VEERAPPA WRIT PETITION No.30419/2018 (GM-RES) BETWEEN: M. M. ASSOCIATES, BESIDES HEAD POST OFFICE, 1ST CROSS, GOWRIPETE, KOLAR, KOLAR DISTRICT 563101. REP. BY ITS PROPRIETOR, SRI.K.V.SHIVAKUMAR. PETITIONER (BY SRI VINAY G., ADV. FOR SRI NAGAIAH, ADV.) AND: 1. STATE OF KARNATAKA DEPARTMENT OF HEALTH AND FAMILY WELFARE, VIKASA SOUDHA, AMBEDKAR VEEDHI, BANGALORE-560001. REP. BY ITS PRINCIPLE SECRETARY. 2. DEPARTMENT OF E PROCUREMENT M.S.BUILDING, AMBEDKAR VEEDHI, BANGALORE-560001. REP. BY ITS PROJECT DIRECTOR. 3. THE DEPUTY COMMISSIONER KOLAR DISTRICT, KOLAR-563101. 2 4. THE DISTRICT HEALTH AND FAMILY WELFARE OFFICER, KOLAR DISTRICT, KOLAR-563101. 5. THE CHIEF EXECUTIVE OFFICER ZILLA PANCHAYATH, KOLARA DISTRICT, KOLAR-563101. 6. THE DISTRICT TENDER SCRUTINY COMMITTEE ZILLA PANCHAYATH, KOLAR DISTRICT, KOLAR-563101. RESPONDENTS (BY SRI D.N. NANJUNDA REDDY, SENIOR COUNSEL FOR SRI M.NARAYANA REDDY, ADVOCATE FOR R5; SRI M.N. SUBRAMANI, LEARNED HCGP FOR R1 TO R4; NOTICE TO R6 IS SERVED AND UNREPRESENTED) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECT AND QUASH THE ORDER DATED 26.6.2018 PASSED BY R-5 VIDE ANNEXURE-D. THIS WRIT PETITION COMING ON FOR ORDERS THIS DAY, THE COURT MADE THE FOLLOWING: ORDER
The petitioner in the above writ petition has sought for a writ of certiorari to quash the order dated 26.06.2018 bearing [CASE NUMBER] passed by the 5th respondent, vide Annexure- D.
2. It is the case of the petitioner that the petitioner is a service establishment registered under the provisions of the [ACT] and doing the business in man power supply. The petitioner got registered its name with the Labour Department of Kolar on 15.04.2018 and the Registration Certificate of the petitioner is being renewed from time to time. From the date of registration, the petitioner is doing the business of supplying the man power, such as group-D employees, data operators, auditors, engineers, programmers and system administrators, to various departments of the Government in the District of Kolar. At present, the petitioner is providing man power supply of 140 employees in such authorities of the Government in the Kolar District, including 77 group-D employees to the 4th respondent. When things stood thus, the 5th respondent, without issuing show cause notice to the petitioner, has proceeded to pass the impugned order dated 26.06.2018, thereby black listing the petitioner, assigning certain reasons, mainly on the premise that the petitioner has not rendered proper service. The ESI and PF details of the group-D employees were not furnished by the petitioner and cheques were not received by the petitioner. Therefore, petitioner is before this Court for the relief sought for.
3. The respondents filed objections to the writ petition and raised various contentions about the illegalities committed by the petitioner and sought to dismiss the writ petition.
4. I have heard the learned counsel for the parties to the lis.
5. Sri [ENTITY], learned counsel appearing for Sri [ENTITY], learned counsel for the petitioner contended that the impugned order passed by the 5th respondent blacklisting the petitioner is without notice and without providing an opportunity of hearing and the same is in utter violation of [SECTION] and [SECTION] of the [ACT] and therefore, sought to allow the writ petition.
6. Per contra, Sri [ENTITY], learned Senior Counsel for Sri [ENTITY], learned counsel for the 5th respondent sought to justify the impugned order and contended that the petitioner has committed various irregularities and therefore, the 5th respondent had no other option except to pass the impugned order.
7. Having heard the learned counsel for the parties, it is undisputed fact that the petitioner has been supplying man power such as group-D employees, data operators, auditors, engineers, programmers and system administrators, to various departments of the Government in the District of Kolar. It is contended that since the petitioner has not rendered proper service and committed irregularities, the 5th respondent passed the impugned order blacklisting the petitioner in the interest of administration.
8. A careful reading of the impugned order dated 26.06.2018 clearly depicts that, before blacklisting the petitioner, no notice or opportunity of hearing was given to petitioner. The 5th respondent ought to have given an opportunity of hearing to the petitioner. The same has not been done in the present case.
9. The Hon'ble Supreme Court, in the case of [PRECEDENT], at paragraphs 12, 13, 14 and 15, has held as under:
12. Under [SECTION] of the [ACT] the Executive power of the Union and the State shall extend to the carrying on of any trade and to the acquisition, holding and disposal of property and the making of contracts for any purpose. The State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to [SECTION] of the [ACT]. [SECTION] speaks of equality before the law and equal, protection of the laws. Equality of opportunity should apply to matters of public contracts.
The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The order of black- listing, has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of black- listing. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality.
13. But for the order of blacklisting, the petitioner would have been entitled to participate in the purchase of cinchona. Similarly the respondent in the appeal would also have been entitled but for the order of blacklisting to tender competitive rates.
14. The State can enter into contract with any person it chooses. No person has a fundamental right to insist that the Government must enter into a contract with him. A citizen has a right to earn livelihood and to pursue any trade. A citizen has a right to claim equal treatment to enter into a contract which may be proper, necessary and essential to his lawful calling.
15. The blacklisting order does not pertain to any particular contract. The blacklisting order involves civil consequences. It casts a slur. It creates a barrier between the persons blacklisted and the Government in the matter of transactions. The blacklists are "instruments of coercion".
10. The said judgment has been followed by the Hon'ble Supreme Court in its latest judgment in the case of Gorkha Security Services vs. Government (NCT of Delhi) and others reported in (2014)9 SCC
105. At paragraph [SECTION] it has been held as under:
[SECTION]. 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." In view of the above, the impugned order passed by the 5th respondent cannot be sustained.
11. For the reasons stated above, writ petition is allowed. The impugned order passed by the 5th respondent dated 26.06.2018 made in [CASE NUMBER] is hereby quashed. The matter is remitted to the 5th respondent for fresh consideration, after issuing notice and hearing the petitioner and pass appropriate order, in accordance with law.
JUDGE kcm