IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 03.12.2009 CORAM: THE HON’BLE MR.JUSTICE K.CHANDRU W.P.No.19513 of 2009 and M.P.Nos.1 and 2 of 2009 1.C.Shanmugavel 2.M/s.Shanmugavel Transport Rep. By its Proprietor C.Shanmugavel 3.Shanmugavel & Co Rep.By its Partner C.Shanmugavel ...Petitioner Vs Indian Oil Corporation Limited, Rep. By its General Manager, State Office – Tamil Nadu & Pondicherry 139, Nungambakkam High Road, Chennai – 600 034. .. Respondent Prayer :Petition under Article 226 of the Constitution of India praying for a Writ of certiorari, calling for the records of the respondent relating to the Circular No.51/2008 dated 17.12.2008 and quash the same as illegal. For Petitioners : Mrs.Chitra Sampath For Respondent : Mr.Vinodh for M/s.Anand,Abdul and Vinodh Associates O R D E R Heard both sides. 2. The petitioners have filed the present writ petition seeking to challenge the order of the respondent in Circular No.51/2008 dated 17.12.2008 and to set aside the same and to grant appropriate relief. 3. By the impugned circular, the petitioner, who was a transport contractor was banned permanently with effect from 17.12.2008 from entering into all Terminals/Depots. The reason for black listing the petitioner was that he had tampered with the Security Locking System/Standard Fittings. https://hcservices.ecourts.gov.in/hcservices/ 4. Notice was ordered to the respondent. No interim order was granted. 5. On notice from this Court, the respondent has filed a counter affidavit dated 23.10.2009 together with supporting documents. 6. The case of the petitioners was that they are running transport business and owning Tank Truck and other transport vehicles. They had participated in the tender with the respondent for transportation of bulk petroleum products from their location at Madurai (Kappalur). The transport contract was given for bulk petroleum products on 14.02.2007 and 02.07.2007 and lasts till 31.10.2008. The contract is for plying three different vehicles. It was also liable to be extended at the sole discretion of the respondent Corporation. The petitioners' were waiting for renewal. When the same was not forthcoming, through the Right to Information Act, they got the information that trucks owned by the petitioners were black listed. According to the petitioners, black listing was done in violation of principles of natural justice. There was no complaint made against the petitioners for shortage of delivery. There was no reliable evidence in the enquiry and the order of black listing is violative of Articles 19(1)(g) of the Constitution of India. 7. In the counter affidavit filed by the respondent, it was stated that through investigation, it came to their notice malpractice were committed in the truck owned by the petitioner with Registration No.TN 45 Q 2143. As per the guidelines issued by the Corporation, the petitioner had violated the guidelines. The Truck owned by the petitioner was loaded with 4 KL MS & 8 KL HSD to a retail outlet M/s.S.R.P.AGencies, Thovalai, Kanyakumari District. When the tank truck reported for unloading, it was inspected by one Assistant Manager (RS)/Nagercoil at the retail outlet on 29.11.2008. On verification, it was found that there was shortage of 10 ltrs. of MS & 45 ltrs. of HSD and the same was noted in the delivery challan duly acknowledged by Tank Truck Driver. On verification with the Truck Crew of the reasons for the abnormal shortage, they confessed the crime and gave it in their handwriting on 29.11.2008. They also demonstrated as to how such stealing was done by them, which was also photographed by the respondent. On getting to know about the inspection, the Office Assistant Manager (Retail Sales) was threatened by the writ petitioner with dire consequences and hence a police complaint was given to the Vadasery Police Station on 02.12.2008. 8. A show cause notice was issued and acknowledged by the tank crew and the petitioner gave an explanation on 04.12.2008. It was stated in the explanation that the shortage of product was due to climate change and that his crews were threatened. It was also stated that along with show cause notice issued by the Chief Terminal Manager, Madurai, a copy of the joint letter given by the tank truck crew as well as by the Assistant Manager (RS) was https://hcservices.ecourts.gov.in/hcservices/ enclosed. It was a clear case where pilferage of product was not feasible without tampering with the Security Locking System. It was also further stated that the petitioner was an habitual offender and in the earlier occasions, several misconducts were committed by them and they were also black listed earlier. The action taken by the respondent was strictly in accordance with the Transport Discipline Guidelines (TDG) and there is no violation of the said guidelines. 9. The counsel for the respondent in their counter affidavit also stated that the matter is purely contractual in nature and in the light of the arbitration clause found in the agreement, the writ petition is not maintainable. A copy of the agreement entered into with the petitioner is also produced in the typed set filed by the respondents. Paragraphs 16 and 17 of the agreement reads as follows: "16.All questions, disputes and differences arising under or in relation to this Agreement shall be referred to the sole arbitration of the Director (Marketing) of the Company. If such Director (Marketing) is unable or unwilling to act as the sole arbitrator, the matter shall be referred to the sole arbitration of some other officer of the Company by such Director (Marketing) in his place, who is willing to act as such sole arbitrator. It is known to the parties herein that the Arbitrator appointed hereunder is an employee of the Company and may be Shareholder of the Company. The arbitrator to whom the matter is originally referred, whether the Director (Marketing) or officer, as the case may be, on his being transferred or vacating his office or being unable to act, for any reason, the Director (Marketing) shall designate any other person to act as arbitrator in accordance with the terms of the Agreement and such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also the term of this Agreement that no person other than the Director (Marketing) or the person designated by the Director (Marketing) as aforesaid shall act as arbitrator. The award of the Arbitrator so appointed shall be final, conclusive and binding on all the parties to the Agreement and provisions of the Arbitration & Conciliation Act 1996 or any statutory modification or re-enactment thereof and the Rules made there under and for the time being in force shall apply to the arbitration proceedings under this clause. 17. The parties hereby agree that the court in city of ____alone shall have jurisdiction to entertain any application or any award/s made by the Sole Arbitrator or other proceedings in respect of any thing arising under this Agreement." https://hcservices.ecourts.gov.in/hcservices/ 10. In the light of the same, the respondent wanted the matter to be dismissed with liberty to the petitioner to avail the alternative remedy. 11. Mrs.Chitra Sampath, learned counsel for the petitioners submitted that the respondent should give notice to the petitioners before black listing and must give reasons in the order. In the impugned order, no reasons were given. With reference to the maintainability of the writ petition, it was stated that there was no subsisting agreement for arbitration on the date of occurrence i.e. On 29.11.2008. Since no work was performed by the Tank Truck belonging to the first petitioner pursuant to any agreement, the arbitration clause will not apply. 12. In support of her contention, the learned counsel relied upon the judgment of the Supreme Court reported in 1994 Supp (2) SCC 699 [Southern Painters v. Fertilizers & Chemicals Travancore Ltd. and another], wherein, it was held that a deletion of name from the list of approved contractors cannot be done without giving opportunity to the affected party by a public sector company. 13. The learned counsel also placed reliance upon the judgment of the Delhi High Court reported in CDJ 2009 DHC 168 [Ambuja Hotels & Real Estates P. Ltd v. Indian Railway Catering & Tourism Corporation Ltd.] for a similar proposition. 14. She also placed reliance upon the judgment of the Patna High Court reported in 2000(Suppl.)Arb.LR 634 (Patna) [Bombay Motor Stores v. Union of India and others) for the very same proposition. 15. Per contra, the learned counsel for the respondent relied upon the judgment of this Court in W.A.No.3812 of 2004 [Kasturi Agencies v. Indian Oil Corporation dated 19.04.2007, wherein a Division Bench of this Court held that in case of arbitration, it is advisable that the parties must be directed to go before the arbitration. Similar was the view taken by another Division Bench of this Court in Union of India v. Sri Gayathri Agencies reported in 2000 (IV) CTC 711. In (2009) 5 MLJ 1315 [Kurshed Sharfudeen and another v. IBP Company Limited and others]. 16. But in all the three cases cited by the respondent, subsisting contract was cancelled. Therefore, the question that arose was whether the parties must have recourse to arbitration. In the present case, the challenge is to the black listing of the petitioners' contract and the attack is against the order dated 17.12.2008 wherein, the petitioner has been banned permanently to act as a contractor. 17. In such circumstances, the Supreme Court in Union of India and others v. A.K.Mithiborwala and others reported in AIR 1975 SC 266 has full application. In paragraphs 20 and 21, it was held as follows: https://hcservices.ecourts.gov.in/hcservices/ 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. 21.With regard to the case of the petitioners, it is made clear that the authorities will give an opportunity to the petitioners to represent their case and the authorities will hear the petitioners as to whether their name should be put on the blacklist or not. This is made clear that the decision on this question will not have any effect on the proceedings pending in Calcutta High Court where the petitioner has challenged the adjudication proceedings under the Foreign Exchange Regulations Act. Any decision of the authorities on the blacklisting will have no effect on the correctness of any of the facts involved in those proceedings." 18. In Ambuja Hotels case (cited supra) Justice S.RavindraBhat of the Delhi High Court after referring to Grosons Pharmaceuticals (P) Ltd v. State of U.P. reported in (2001) 8 SCC 604 which was also followed in B.S.N.Joshi & Sons Ltd v. Nair Coal Services Ltd. (2006) 11 SCC 548, set aside the debarring of a contractor by black listing him. 19. In the present case, as contended by the petitioners, the petitioners were not heard on the question of black listing. Therefore, the impugned order is liable to be set aside. 20. Accordingly, the writ petition stands allowed; the impugned circular No.51/2008 dated 17.12.2008 is set aside. However, it is open to the respondent to pass appropriate orders after giving due opportunity to the petitioners on the question of black listing. With reference to renewal of his contract, the petitioners cannot make use of this order. If there is any breach on the terms of their engagement, appropriate remedies in other forums will have to be availed. No costs. Consequently, connected miscellaneous petitions are closed. Sd/- Asst.Registrar /True Copy/ Sub.Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ To The General Manager, Indian Oil Corporation Limited, State Office – Tamil Nadu & Pondicherry 139, Nungambakkam High Road, Chennai – 600 034. + 1 cc to M/s. Anand Abdul & Vinodh, Associates,Advocates SR 66124 + 2 ccs to M/s.Chitra Sampath, Advocate, SR 65577 Order in W.P.No.19513 of 2009 SAI (CO) RH (11.12.09) https://hcservices.ecourts.gov.in/hcservices/