IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 3966 of 1999 For Approval and Signature: Hon'ble MR.JUSTICE C.K.THAKKAR ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- VIMAL CONSTRUCATION CO Versus STATE OF GUJARAT -------------------------------------------------------------- Appearance: MR DA BAMBHANIA for Petitioner MR M.A.BUKHARI,AGP for Respondent No. 1, 2 -------------------------------------------------------------- CORAM : MR.JUSTICE C.K.THAKKAR Date of decision: 21/03/2000 ORAL JUDGEMENT This petition is filed by the petitioner for an appropriate writ, direction or order quashing and setting aside a decision of the State Government, respondent No.1 of blacklisting the petitioner vide a Circular Memorandum dated 16th April, 1999 at Annexure `Q' to the petition and a consequential communication dated 3rd May, 1999 issued by the Executive Engineer,Project Division III, Himatnagar,respondent No.2, Annexure `P' to the petition, and by restraining the respondents , their agents, servants and nominees from taking any action on the basis of the above decisions . The case of the petitioner is that it is a partnership firm duly registered under the Indian Partnership Act, 1932 doing business in construction work . On 15th September , 1990, a work-order was given to the petitioner for execution of work of construction of Canal Syphone at Branch Canal B.3 on Amravati river. The cost of construction was Rs. 23.85 lacs. Duration for the work was 12 months. After completing necessary formalities , the petitioner started the work and according to him, it was completed and everything was done in accordance with law. It was further case of the petitioner that all bills were paid to the petitioner including the final bill which was paid on 2nd March, 1994. It was stated by the petitioner that a certificate regarding satisfactory completion of work was issued in his favour on 8th August, 1994 . Since the petitioner wanted to get its name registered for upgradation in the Government work, an application was made to the State Government through Executive Engineer, Himatnagar to enter the name of the petitioner in the list of contractors ,Grade A. After considering the application and the works undertaken by him, the application was granted and on 20th December, 1995, a decision was taken by the State Government to enter the name of the petitioner by upgrading it to Grade A. The Executive Engineer, accordingly informed the petitioner vide a communication, dated 2nd January, 1996 that its application was granted. It was valid for three years. It was further the case of the petitioner that on 27th May, 1998, another application was made by him to get his name entered in Grade AA. But no decision was taken by the State Government so far. Suddenly, however, as alleged by the petitioner, a decision was taken by the Government on August 18, 1998 to blacklist him . The petitioner was aggrieved by the said decision as no notice was issued, no explanation was sought and no opportunity of hearing was afforded to him before taking the above decision. Meanwhile, however, various tenders were invited and though the petitioner competed with other persons, no decision was taken on his bid. It was stated by the petitioner that some of the tenders were submitted by him prior to the impugned decision, dated 18th August , 1998; whereas, some of them were subsequent to the said date. Likewise, in some of the tenders, the rates quoted by the petitioner were lowest and hence, ordinarily, contract should have been awarded to him. He was, however, not awarded the contract presumably in view of the fact that a decision to blacklist him was taken by the Government. It appears that a notice was issued to the petitioner on 2nd September, 1998 by the Executive Engineer , Annexure `C' to the petition by which he was called upon to show cause why he should not be placed in a "black list" . He was asked to offer an explanation within seven days from the receipt of notice ,failing which appropriate decision would be taken against him. Two replies were submitted by the petitioner on 18th September, 1998 and 1st January, 1999. It also appears that the petitioner approached this Court by filing SCA No. 9561 of 1998. The said petition came up for hearing before the learned Single Judge and after hearing both the sides, it was disposed of on 21st December, 1998. The order reads as under : "The petitioner has challenged the show cause notice issued by the Executive Engineer, Himatnagar, who is the competent authority. The petitioner has filed reply to the same. As per the requirement, a second show cause notice is also required to be issued and when issued, the petitioner will give appropriate reply to the same .Ms. Devani, learned AGP has submitted that as per the procedure, the competent authority will submit the report to the State Government after taking into consideration the submission of the petitioner as well as the reporting authority, and the State Government will take appropriate decision in the matter after hearing the parties. In view of the above, in my opinion, the petition is not required to be entertained at this stage. As the petitioner has an alternative remedy only direction that can be given at this stage is to direct the respondent authority not to implement the decision, if it is adverse to the petitioner, for a period of one week from the date of communication thereof to the petitioner to enable the petitioner to seek appropriate relief from the appropriate forum. Subject to this, the petition is rejected. Notice discharged with no order as to costs." Thereafter, the petitioner made a representation, but as stated above, on 16th April, 1999, a decision was taken blacklisting him which is challenged in the present petition. Notice was issued on 3rd June, 1999 and after hearing the parties, Rule was issued on 16th July, 1999 . Today, the matter is placed for final hearing. I have heard Mr. D. A. Bambhania for the petitioner and Mr. M.A.Bukhari, AGP for the respondents. Mr. Bambhania raised several contentions . He submitted that the petitioner was placed in the list of approved contractors and in that capacity, he had completed several works to the satisfaction of the department. Even regarding to the work in question i.e. Canal Syphone on Amravati river, work order was given to him in 1990 which was satisfactorily completed. A certificate to that effect was also issued by the authorities in favour of the petitioner. Payment of running bills as well as final bill was also made. The period of satisfaction was completed in 1992. Then, after a very long and unreasonable period, proceedings were initiated against the petitioner which were arbitrary and unreasonable. It was also submitted that before taking a decision on 18th August, 1998 by the Government, no notice was issued, no explanation was sought and no opportunity of hearing was afforded to the petitioner. Said order was,therefore, violative of principles of natural justice and it was void and required to be quashed and set aside. It was urged that though a decision was taken by the Government, merely with a view to show that there was observance of principles of natural justice, a subordinate authority was asked by the Government to issue a show cause notice , to call for explanation and to afford hearing. Such opportunity, in the submission of the learned advocate for the petitioner, was an empty formality . As the decision was taken at the highest level, the authorities were bound to act under the dictation of the Government and all proceedings taken thereafter were vitiated. It was submitted that when earlier SCA was placed for hearing, the learned Single Judge disposed of the petition by specifically observing in the order on the submission of the learned AGP , that the "State Government after taking into consideration the submission of the petitioner as well as reporting authority, will take appropriate decision in the matter after hearing the parties". It was,therefore, incumbent on the part of the State Government to afford hearing , to consider the matter on merits and to take appropriate decision in accordance with law. In the instant case, it was not done as neither notice was issued by the State Government nor hearing was afforded by it. The order was, therefore, illegal and unlawful. It was submitted that the impugned action has not only resulted in depriving the petitioner of benefits which had accrued from the work in question but it has also adversely and prejudicially affected the petitioner of other works some of which are pending and payment has not been made to the petitioner . Moreover, in the light of the decision taken by the respondents , the case of the petitioner will not be considered at all for all time to come in future. The impugned decision thus has resulted in civil consequences and it ought not to have been arrived at in an arbitrary manner which has been done in the instant case. Drawing my attention to a policy decision taken by the Government in such matters, by a circular dated 4th November, 1986, Annexure IV to the affidavit in reply, it was submitted that name of the contractor can be removed from the approved list of contractors only when he is found to have committed acts mentioned in clause 5 of the Standardised Code of Registration". Clause 5 reads as under : "5. Removal from the approved list: The registering authority may remove the name of a contractor from the approved list of the contractors if he- (a) has, on more than one occasion, failed to execute a contract or has executed it unsatisfactorily, or (b) is proved to be responsible for constructional defects, in a number of cases; or (c) persistently, violates any important conditions of the contract; or (d) fails to abide by the conditions of registration or is found to have given false particulars at the time of registration; or (e) is found to have given false information at the time of registration; or (f) is declared or is in the process of being declared bankrupt, insolvent, would up, dissolved or partitioned; or (g) persistently violates the labour regulations and rules." Mr. Bhambhania submitted that whereas sub-clauses (d) and (e) relate to registration, clause (f) speaks of insolvency, bankruptcy, winding up, etc. Clauses (a) to (d) deal with defaults, defects and violation of terms and conditions imposed on the contractors. They, however, specifically provide that a name of a contractor can be removed from the list of approved contractors if there is failure, defect or violation of terms and conditions for more than one occasion. For an isolated act, no drastic act of removal of name can be taken. The impugned action is taken only on the allegation for one work and it is,therefore, illegal, unlawful and deserves to be quashed and set aside. There is total non-application of mind on the part of Government in not considering the facts and circumstances mentioned by the petitioner in his replies dated 18th August, 1998 and 1st January, 1999. Looking to the impugned circular , the counsel submitted, apart from the fact that it is a cryptic order and does not even state that the State Government has considered the replies to the show cause notice and did not agree with the defence put forward or the grounds raised by the petitioner or the decision was required to be taken in the larger interest to blacklist the petitioner, it does not even think fit to communicate. It was also contended that after the work was over, a certificate regarding satisfactory completion of work was issued and payment was made. After a long period of six years, it was not open to the respondent authorities to take any action and in any case,a drastic action of blacklisting the contractor and on that ground also, the order is required to be quashed and set aside. Finally, it was submitted that there was "no objective satisfaction" as required and on that ground also, the decision is vulnerable. Mr. Bukhari,learned AGP, on the other hand, supported the order passed by the Government. He submitted that notice was issued to the petitioner. Two replies were submitted by him and after considering the facts and circumstances, the Government has taken a decision and the petitioner cannot make any grievance against such decision. He conceded that the order cannot be said to be a speaking order. He, however, submitted that Government was not writing a judgment and hence, it was not required to deal with each and every point raised in the replies to the notice. According to him, when the Government has stated that it has reached a conclusion "after careful consideration of the matter", it is presumed that Government has taken into account all relevant facts and circumstances, has not considered any factor which is irrelevant , extraneous or non-existent and that in undertaking the exercise of power, has reached a conclusion that the action was called for and accordingly, the order was passed. He submitted that it was true that in 1990, work order was given which was completed in 1991. A certificate regarding satisfactory work was issued in 1992 and payment of all bills, including final bill, was made and even thereafter some time had elapsed. But on the basis of the material submitted by the officers, the State Government found that the work was not done by the petitioner as required and hence, a show cause notice was issued and after giving an opportunity of hearing, a decision was taken. Meanwhile, if the petitioner was granted upgradation to Grade A, that fact alone cannot be construed in favour of the petitioner. At that time, there was nothing with the Government regarding unsatisfactory work undertaken by the petitioner in 1990. In the light of unsatisfactory work, therefore, Government did not grant the application of the petitioner to place him in Grade AA and also did not renew registration after 31st December, 1998. Mr. Bukhari submitted that on 18th August 1998, no final decision was taken by the Government. That letter directed the Executive Engineer to submit his report with a proposal to place the petitioner in black list. According to him, there was no direction but merely a proposal was sought in the light of unsatisfactory work done by the petitioner. It is in these circumstances that earlier petition of the petitioner was allowed and Government was directed to reconsider the matter and to reach appropriate decision after affording an opportunity of hearing to him. A notice was issued by the Executive Engineer, the petitioner submitted replies and clarified that he does not want to state anything more . After considering the replies, a final decision was taken and there is illegality in it. He, therefore, submitted that the petition deserves to be dismissed. In the facts and circumstances of the case, in my opinion, the petition deserves to be partly allowed. Firstly, looking to the communication, dated 18th August, 1998, Annexure XXIV (3) to the affidavit in reply, it is clear that the State Government asked the Superintending Engineer to submit a report so that responsibility of officers can be ascertained . It was also indicated that in such matters, there should not be delay on the part of the Superintending Engineer. Finally, he was informed to send immediate proposal to place the name of the petitioner in the black list. The Gujarati sentence reads as under: In my opinion, the learned counsel for the petitioner is right in contending that virtually,a decision was taken by the Government and what was conveyed by the Government to the Superintending Engineer was to send a proposal to that effect. It was, therefore, not open to the Superintending Engineer to ignore the direction issued by the State Government and he was required to follow the said instruction contained in the above letter. In this connection, reliance was placed on a decision of the Supreme Court in Commissioner of Police vs. Gordhadas, AIR 1952 SC 16 and in Mohinder Singh vs. Chief Election Commissioner,AIR 1978 SC 851. Almost a similar question arose in Amirudhsinhji v. State of Gujarat, AIR 1995 SC 2390. It was alleged that an offence was committed by the accused under the Terrorists and Disruptive Activities (Prevention) Act, 1987 (`TADA'). DSP did not give approval on his own but addressed a letter to the Additional Chief Secretary requesting him to accord permission to proceed under the TADA which was granted. It was contended that DSP was acting under dictation. The order was sought to be supported by the State on the ground that it was merely a prayer on the part of DSP and it was not a case of acting under dictation. Negativing the contention and upholding the argument of the accused, the Apex Court stated that dictation came on the prayer of the DSP. "The dictation came on the prayer of the DSP" will not make any difference to the principle. Accordingly, the action was held bad. Presumably, in these circumstances, when the matter came before the learned Single Judge of this Court in previous SCA No. 9561 of 1998, the learned Single Judge directed the State Government to take into consideration submissions of the petitioner as well as the reporting authority and to take appropriate decision in the matter. Obviously,therefore, the State Government could not have proceeded on the basis of the decision taken on 18th August, 1998 . The decision impugned in this petition is in the form of Circular Memorandum and merely states as under : 2, After careful scrutiny and consideration of the whole case, Government is constrained to order that the contractor M/s Vimal Construction Company ,Sinoi via Adipur,Taluka Anjar (Kutch) and its partners mentioned below should be banned for ever form the assigning the business with Government of Gujarat from the date of issue of this order: Name of partners Address 1. Shri Premji Kanji P.O Sinoi,Tal.Anjar (Kutch). 2. Shri Keshavji Kanji .do. 3. Shri Jagdish Premi .do. 4. Shri Naren Govind .do. 3. Aforesaid punishment only should be communicated to the said contractor without giving any facts of the case". Thus, in para 3, it was stated that only order of punishment should be communicated to the contractor without further facts of the case. It is the case of the petitioner that the Circular Memorandum dated 16th April 1999 was never communicated to the petitioner. Obviously, the petitioner is right . In the Circular Memorandum itself, it was stated by the Government that the Circular Memorandum was not to be communicated to the petitioner. From the copies forwarded to the authorities also, it is clear that the name of the petitioner is not found anywhere. In para 3 also, it was clarified that punishment order was only to be communicated,which was done by the Executive Engineer on 3rd May , 1999, Annexure `P'. By the said communication, factum of cancellation of registration of the petitioner was forwarded to the petitioner firm. The question, however, is whether it was in accordance with law. In this connection, my attention was invited to several decisions . I do not intend to burden my judgment by referring to all of them , except the leading decision in .M/s Erusian Equipment and Chemicals Limited vs. State of West Bengal, AIR 1975 SC 266 . In that case, an identical question arose before the Supreme Court and the Court considered the circumstances in which a person can be black listed. After referring to the relevant provisions of the Constitution, their Lordships observed that the State has right to trade, but it has also a duty to observe equality. Drawing distinction between a private individual and the State, the Court stated that whereas ordinarily, an individual can choose not to deal with any person, Government cannot choose to exclude persons by making artificial discrimination. It was indicated that order of blacklisting a person has the effect of depriving him of equality of opportunity in the matter of public contract. Hence, putting a name in the black list causes prejudice to the person and such action must be supported by legality. Then, as a proposition of law, the Apex Court held that blacklisting order does not pertain to any particular contract. Such order involves "civil consequences". It casts a slur. It creates a barrier between the persons blacklisted and the Government in the matter of transactions. It is an instrument of coercion. Considering far reaching consequences likely to ensue by blacklisting a person, their Lordships concluded in para 20 as under :- "20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist." (Emphasis supplied). From the above observations, it is clear that the conclusion must be reached by the authority not on the basis of "subjective satisfaction" but it must be supported by "objective satisfaction". When a decision is arrived at on "objective satisfaction" , there must be material on record and when such action is challenged by the aggrieved party who has been blacklisted, he can contend before a competent court that the circumstances which weighed with the authority in blacklisting him were either non-existent or relevant factors were ignored, or extraneous and/or relevant considerations were kept in mind. True it is that the State Government was not writing a judgment. Mr. Bukhari ,however, forgets that when a decision is based on objective consideration and satisfaction of the authority depends on objective materials, if the authority does not state anything at all, it is not permissible to speculate as to what consideration weighed with the authority in taking such decision ? In the instant case, except the expression "After careful scrutiny and consideration of the whole case", no objective fact has been stated. The matter did not end there. Even that part of the decision was also not communicated to the petitioner. One fails to understand why even para 2 was not communicated to the petitioner though a decision against him was taken. In para 3, it was specifically stated that the petitioner should be informed only about final decision without giving any facts of the case. Now, both the replies dated 18th September, 1998 and 1st January, 1999 are on record. Several contentions were raised by the petitioner in those replies. Opportunity of hearing, though was required to be afforded by the State Government, was not given by the State. Looking to the notice, it is clear that it was not issued by the State Government but by the Executive Engineer ,though direction of the learned Single Judge in previous petition was that such opportunity was to be given by the State Government. No appeal was filed by the State Government against the said order and the order of the learned Single Judge was final. It was,therefore, incumbent on the State Government to issue notice and afford hearing to the petitioner. But let us consider liberally in favour of the State Government that when reply was submitted by the petitioner to the Executive Engineer stating that the petitioner did not want to add anything more except the reply dated 1st January, 1999, the State