RSA No.630 of 2006 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. RSA No.630 of 2006 Date of Decision: 17.9.2009 Baldev Krishan .....Appellant Vs. Punjab Agro Industries Corporation and another ....Respondents .... CORAM : HON'BLE MR.JUSTICE RAJIVE BHALLA **** Present : Mr. Mohd. Salim, Advocate for the appellant. Mr. Rupam Kumar Aggarwal, Advocate for the respondents. .... RAJIVE BHALLA, J The appellant challenges the judgement and decree dated 19.12.2005, passed by the Additional District Judge, Sangrur, accepting the appeal filed by the respondents, setting aside the judgement and decree dated 18.5.2005, passed by the Civil Judge (Junior Division), Sangrur and as a consequence dismissing the suit filed by the appellant. The appellant filed a suit for recovery of Rs.1,22,400/- with interest @ 12% p.a. by alleging that the respondent had no right to forfeit Rs.90,000/- deposited as surety/earnest money. In addition, the appellant prayed that the order black listing him should be set aside, being violative of the principles of natural justice. On facts, the appellant averred that he was a labour contractor who had already worked with the respondents, he requested the Incharge of the Malerkotla Centre, to call for a fresh labour contract for the year 2000-2001, as he was ready to work at a rate below the RSA No.630 of 2006 2 existing rate. The appellant deposited security/earnest money of Rs.36,000/- and further deposited another sum of Rs.54,000/- and made a formal offer expressing his readiness to work at the rate of 15% above the basic rate. It is further averred that though the appellant was ready to work at this rate, he was not invited to participate in the tender and the contract was awarded to another contractor. The plaintiff, therefore, made a request for return of Rs.90,000/- but instead the respondents ordered black listing of the plaintiff and forfeiture of this amount. It was, therefore, prayed that the order black listing the plaintiff be set aside and the respondents be directed to refund Rs.90,000/-. Upon notice, the respondents filed a written statement admitting that the appellant's request, for issuance of a fresh tender was accepted and, therefore, a tender notice was advertised but the appellant, did not participate in the tender, compelling the department to call for fresh tenders. The work was thereafter allotted to Sh.Vikas Gupta and Sh.Sham Lal at 49% above the schedule of rates causing a monetary loss of Rs.1,30,000/-. The respondents were justified in forfeiting Rs.90,000/- and black listing the appellant. On the basis of the pleadings, the learned trial court framed the following issues :- “1. Whether plaintiff paid Rs.90,000/- as security to defendants ? OPP 2. Whether plaintiff is entitled to recover suit amount alongwith future interest @ 12% p.a. from defendants ? OPP. 3. Whether order of forfeiture of amount of security RSA No.630 of 2006 3 of plaintiff and ordering for black listing of plaintiff is illegal, null and void ? OPP. 4. Whether suit is not maintainable in the present form ? OPD. 5. Whether plaintiff has no cause of action to file the present suit ? OPD. 6. Whether suit is barred by limitation ? OPD. 7. Whether plaint is not properly verified, if so, its result ? OPD. 8. Relief.” After considering the pleadings, the evidence adduced and the arguments addressed, the trial court decreed the suit by holding that the forfeiture of security and the order of black listing are null and void, being violative of the principles of natural justice. The suit filed by the appellant was therefore, decreed for recovery of Rs.90,000/- with interest. Aggrieved by the aforementioned judgement and decree, the respondents filed an appeal. Vide judgement and decree dated 19.12.2005, the first appellate court accepted the appeal, set aside the judgement and decree passed by the trial court and dismissed the suit by holding that as the appellant had not come forward to participate in the tender, the department suffered a loss of Rs.1,30,000/-. The respondents were, therefore, entitled to forfeit the amount deposited by the appellant and black listing the appellant. Counsel for the appellant submits that the appellant was black listed and the security forfeited without any show cause notice. The orders RSA No.630 of 2006 4 forfeiting security and black listing the appellant are even otherwise not justified. It is argued that though the appellant made an offer to execute the labour contract at 15% above the schedule of rates, he was not called to participate in the tender. The tender was allotted to another party, at a much higher rate. As the appellant was never informed about the tender, the first appellate court had no jurisdiction to set aside the judgement and decree passed by the trial court. It is submitted that in view of the error committed by the first appellate court, the following substantial questions of law arise for consideration :- “1. Whether the courts below can hold that no notice of black listing and forfeiture of the security amount is required ? 2. Whether the appellant was not entitled to get back his security amount which was admittedly deposited to the respondent no.2 and especially there is no fault on the part of the appellant.?” Counsel for the respondents, on the other hand, submits that the appellant approached the department with offer to execute the labour contract at 15% above the schedule of rates and deposited a sum of Rs.90,000/-. At his request, a fresh tender was issued but the appellant did not respond to the tender notice. The respondents were, therefore, compelled to re-advertise the tender, which had to be awarded at a much higher rate and led to a loss of Rs.1,30,000/-. It is argued that in this view of the matter, the respondents were justified in forfeiting the amount of Rs.90,000/- and black listing the appellant. RSA No.630 of 2006 5 I have heard counsel for the parties, perused the impugned judgements and considered the substantial questions of law. Admittedly, till such time as a contractor does not come forward with an offer to work at a lesser rate and formally requests for the issuance of a fresh tender, the labour contract is awarded to the same labour contractor from year to year. The appellant offered to work at a lesser rate i.e. 15%, above the schedule of rates. He deposited a sum of Rs.90,000/- as security and made a request that a fresh tender be issued. The respondents accepted his offer and issued a fresh tender notice inviting offers for the labour contract. The appellant, however, did not participate in the tender, compelling the respondents to re-advertise the tender. The new tender was awarded at 49% above the schedule of rates, instead of the existing rate of 36% above the schedule of rates, causing a loss of Rs.1,30,000/-. The appellant did not raise any objection. He waited for the new tender to conclude and for the procurement season to end before he approached the respondents for refund of the security by raising a false plea that he was not informed of the tender notice. The respondents refused to refund the security and also black listed the appellant. The first appellate court has held that the respondents were justified in forfeiting the security and black listing the appellant. The appellant was the contractor for the year 1998-99 and was conversant with the procedure that governs the award of labour contracts. The labour contract was advertised at his request but he failed to participate in the tender. His story that he was not aware of the issuance of tender notice is not believable and was, therefore, was rightly rejected by the first appellate court. It would be necessary to once again state that the appellant, RSA No.630 of 2006 6 kept silent during the procurement season and only raised a grievance after the procurement season came to an end. It appears that the appellant was not in a position to supply labour at 15% above the schedule of rates and, therefore, did not participate in the tender, sanguine in his belief that he would convince the respondents to refund the deposited amount. The argument that the respondents were required to issue a show cause notice before forfeiting the deposited amount cannot be accepted in view of the appellant's misconduct. The appellant induced the respondents to issue a fresh tender and then failed to participate thereby causing a loss to the respondents. As a consequence, the respondents were entitled to make good the loss by forfeiting the security. The argument that the appellant could not be black listed without service of a show cause notice must, however, be accepted. An order black listing a person visits him with severe civil consequences and, therefore, can only be passed after service of a show cause notice and then also after considering any explanation that such person may furnish. Admittedly, no show cause notice was issued and no explanation was sought, before the appellant was black listed. The first appellate court apparently confused the issues namely the issue of forfeiture of security and the issue of black listing. The issue of forfeiture arose from the loss suffered by the respondents, which they were legitimately entitled to defray from the amount deposited by the appellant, whereas the appellant's black listing is an entirely different matter, as it affects his right to carry on his avocation and business not merely with the respondents but with other departments as well. The order black listing the appellant is, therefore, a nullity. RSA No.630 of 2006 7 In view of what has been stated herein above, the questions of law framed by the appellant are answered by holding that the first appellate court did not commit any error in upholding the forfeiture of Rs.90,000/- but committed an error of law while affirming the order black listing the appellant, as an order of black listing can only be passed after service of a notice calling upon the party to show cause why it should not be black listed. As a consequence, the appeal is partly allowed and the order black listing the appellant is held to be null and void. The judgement and decree dated 19.12.2005, passed by the Additional District Judge, Sangrur is modified accordingly. No order as to costs. 17. 9.2009 ( RAJIVE BHALLA ) GS JUDGE