IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 6458 of 2001 For Approval and Signature: Hon'ble MR.JUSTICE KUNDAN SINGH ============================================================ 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 -------------------------------------------------------------- ASIF ENTERPRISES Versus O.N.G.C. LIMITED -------------------------------------------------------------- Appearance: Mr. Y.N.Oza, Sr. Advocate for MR KRISHNA G PILLAI for Petitioner. Mr. S.B.Vakil, Sr. Advocate with MR RAJNI H MEHTA for Respondents No. 1-5 -------------------------------------------------------------- CORAM : MR.JUSTICE KUNDAN SINGH Date of decision:11/01/2002 CAV JUDGEMENT This petition has been filed for quashing and setting aside the impugned order dated 23rd January, 2001 passed by the respondent no. 5 at Annexure "A" and for a direction to the respondent Corporation to accept the tenders submitted by the petitioner for contracts as mentioned in para-8 of the petition and to award the said contract to the petitioner in accordance with law as if impugned order dated 23rd January, 2000 was not passed and to issue new tender forms to the petitioner for future cotnracts and accept and process the said tenders for future contracts in accordance with law. 2. The petitioner is an approved contractor of the respondent Corporation since 1990 and various contracts have been completed by the petitioner and it was awarded on average about 40 contracts per year from 1992 to 1997 and they were completed to the satisfction of the Corporation. The dispute relates in respect of the contracts awarded in the year 1997 which are as follows: (a) For laying of 8" dia effluent pipe from SND GGST to ETP Jhalora was awarded by agreement no. BDA/CMD/TL/CA/23/96 dated 29.11.1996. (b) For laying of 8" dia effluent pipe from EPP to Sanand Plymer Plant was by agreement No. BDA/CMD/CA/24/97 dated 1.1.1997. The petitioner submitted two bank guarantees bearing nos. 173-1 for Rs. 2,38,780/- and 169-1 for Rs. 3,41,743/-. As the contracts could not be completed within prescribed time limit, the bank guaratees were required to be renewed. At that time, it was found that those bank guarantees were fake and they were furnished by the petitioner due to some mistake of the employee of the petitioner. Hence, the petitioner submitted two fresh bank guarantees which were accepted by the respondent Corporation on the recommendation of the committee. After completion of the contract to the satisfaction of the Corporation, both the bank guarantees were returned to the petitioner. As furnishing of fake bank guarantees by an employee of the petitioner amounts to misconduct, that employee was terminated from service of the petitioner. Thereafter, the petitioner was also awarded the contract by an agreement dated 15/16.9.1997 for Rs. 28,92,689.18 ps. and dated 10/17.7.1998 for Rs. 58,56,450/-. The respondent Corporation also awarded to the petitioner 45 contracts for Ahmedabad project and 32 contracts for Mahesana project and those contracts were successfully completed by the petitioner to the satisfaction of the respondent Corporation. The letter dated 16th May, 2000 was issued to the petitioner. One Mr. G.L.Gupta was the General Manager of the Western Region business centre of the respondent Corporation and Mr. G.L.Gupta had taken voluntary retirement and in his place Mr. Prakash Mehta came as General Manager (TPL) E & C. After taking of the charge, Mr. Prakash Mehta started harassing the petitioner and reopened old issue of the year 1997 pertaining to the bank guarantees bearing nos. 173/1 and 169/1. Mr. Prakash Mehta sent a letter on 16.5.2000 stating therein that the bank guarantees which were submitted by the petitioner were fake. On the basis of the intimation received from the State Bank of Saurashtra, Kalol branch, the respondent Corporation had already been informed by the bank regarding the said two bank guarantees in the year 1998 itself and therefore, there was no reason for the bank to inform the respondent Corporation again. The letter of the bank dated 5.4.2000 shows tht thebank had already intimted by telegrams and letters to the respondent Corporation. Thus, the respondent Corporation was aware of the said issue and that issue was already resolved and more than 80 contracts were awarded by the respondent Corporation to the petitioner and those contracts were completed by the petitioner to the satisfaction of the Corporation. Therefore, issuance of the said letter was totally out of consideration and unnecessary and only with view to harass the petitioner and with a malafide object and to extort money from the petitioner. Mr. Prakash Mehta asked the petitioner to give an amount of Rs. 7 lacs for obliging the petitioner with two contracts and not to initiate any proceedings or inquiry regarding the above mentioned two bank guarantees. As the petitioner had not committed any mistake or fault, it was the bonafide mistake on the part of the petitioner. The petitioner did not incline to give any illegal gratification to Mr. Mehta. Hence, he filed a complaint before CBI against Mr. Mehta and CBI had laid a trap and Mr. Prakash Mehta was caught red handed while he was accepting Rs.50,000/- towards part payment of Rs. 7 lacs. He was arrested and proceedings were initiated against him. The petitioner replied the letter dated 16.5.2000 of Mr. Prakash Mehta on 28th May, 2000. Thereafter, on 8.12.2000, a notice was issued by the respondent no. 3 asking the petitioner to show cause as to why the respondent Corporation should not ban future business dealings with the petitioner. That show cause notice was replied by the petitioner through its advocate on 14.12.2000. The petitioner again sent a letter dated 5th January, 2001 to the Deputy General Manager and Inquiry Officer requesting him to give an opportunity of personal hearing by way of personal meeting. But no such personal hearing or meeting was given to the petitioner and the impugned order was passed on 23.1.2001 by the respondent Corporation informing the petitioner that the Corporation has decided to ban any fresh business dealing with the petitioner for a period of 10 years from the date of issue of the letter. The petitioner has filled up the tender forms for two contracts. The bid for the work at Sr. No.2 was opened on 27th January, 2000 and the price bid was to be opened on 24th April, 2000. The petitioner was directed by a letter dated 21st April, 2000 to remain present at the time of opening of the price bid. On 24th April, 2000 the price bid was opened and the respondent Corporation has given offer by a letter dated 29th April, 2000. The petitioner accepted the counter offer made by the Corporation and sent acceptance by a fax message dated 21st May, 2000. The petitioner has given a notice dated 4.7.2000 to the respondent Corporation requesting to issue a letter of intent to the petitioner but the respondent Corporation has not issued the letter of intent and nor has replied to the sid notice. The petitioner therefore, filed a writ petition being SCA No. 7899 of 2000 which was dismissed by this Court on 19th July, 2000 on the ground that no adverse decision has been taken against the petitioner and hence the writ petition was premture and liberty was granted to file a fresh petition, if any adverse decision is taken. Another tender was issued by the respondent Corporation. The petitioner also submitted its tender on 4.4.2001. The said tender was opened on the same day. The petitioner's tender was found 27% below the estimated rate of the respondent Corporation, but the work of the tender was not awarded to the petitioner. Another tender for construction of fighting system was submitted by the petitioner on 13th October, 2000 and that was also lowest 20% below the estimated rate of the respondent Corporation. Still however, the aforesaid contract was not awarded to the petitioner due to impugned order. One rate contract for the work of trunk feeder was submitted in April 2000, but the same has not been considered by the respondent Corporation because of the impugned order. The above said contracts are still not awarded to any person though the tender given by the petitioners is lowest, yet due to impugned order, the petitioner has not been awarded the above contracts. The petitioner filed Regular Civil Suit no.31 of 2001 in the Court of Civil Judge (S.D.), Gandhinagar. It also filed application exh. 5 for interim injunction. The learned Civil Judge (S.D.), Gandhinagar granted ad-interim injunction which was made absolute by an order dated 8th March, 2001. Being aggrieved by the order of 8th March 2001 of the Civil Judge (S.D.), Gandhinagar, the respondent Corporation filed Appeal from Order no. 30 of 2001 in the Court of the Assistant Judge, Ahmedabad (Rural) at Gandhinagar. The learned Assistant Judge, Gandhinagar allowed Appeal from Order no. 30 of 2001 by his order dated 31st July, 2001 and set aside the order dated 8th March, 2001 on the ground of jurisdiction only. According to the petitioner, the learned Assistant Judge, has, without going into the merits and details, allowed the appeal filed by the respondent Corporation on the ground that the cause of action has arisen within the jurisdiction of the Gandhinagar Court. Being aggrieved by the impugned order passed by the respondent Corporation, the petitioner has therefore, filed the present petition inter alia on the ground that the impugned action of the respondent Corporation in black-listing the petitioner firm is prima facie bad, illegal and against well settled principles of law and fair-play. A show cause notice was issued on 8.12.2000 and that was replied by the petitioner on 14.12.2000. By another letter dated 5.1.2001, the petitioner requested the Deputy General Manager (MMT) Enquiry Officer to give an opportunity of personal hearing, but in absence of the opportunity of personal hearing in which the petitioner could be able to explain its case in detail, is against principles of natural justice, arbitrary, ultra vires, illegal and violative of Articles 14 and 19 of the Constitution of India. The incident took place in the year 1997 and the respondent Corporation had not taken action. The State Bank of Saurashtra had already informed the respondent Corporation in the year 1998. Fresh bank guarantees had already been furnished by the petitioner and the same were accepted by the respondent Corporation. The inquiry initiated by the Corporation and the impugned order suffers from the vice of delay, laches and acquiescence and also hit by the principle of estoppel. Once the respondent Corporation had accepted fresh bank gurantees, there was no reason for initiating the inquiry or taking any action against the petitioner after lapse of three years and hence the impugned order is not sustainable in the eye of law. Moreover, the impugned order is a non-speaking order and has been passed in mechanical exercise of power. The inquiry against the petitioner was initiated with malafide motive by the General Manager Mr. Prakash Mehta who had taken over the charge of the said post and the petitioner has made a specific allegation against Mr. Prakash Mehta. He demanded Rs. 7 lacs as illegal gratification and as the petitioner could not satisfy the demand, he specifically threatened to black-list the petitioner. At the instance of the petitioner, Mr. Mehta was caught red handed while accepting Rs. 50,000/- as part payment towards the amount of Rs. 7 lacs. Hence, proceedings were initiated against the petitioner at the instance of Mr. Prakash Mehta. Thus, the action against the petitioner is with a malafide motive and deserves to be quashed and set aside. The impugned order is vindictive in nature just to take revenge against the petitioner. The inquiry has proceeded and the impugned order has been passed without following principles of natural justice and without considering the case of the petitioner in its proper perspective. The whole action on the ground of bank guarantees given by the petitioner is vague. That was due to mistake on the part of the employee of the petitioner and that was corrected by furnishing fresh bank guarantees. There was no intention on the part of the petitioner to commit any fraud or cheating the respondent Corporation. The punishment of black-listing is disproportionate to the allegations made against the petitioner. As the petitioner has worked for about 11 years to the satisfaction of the Corporation and that amounts to stigma on the career of the petitioner firm. 3. Affidavit-in-reply has been filed on behalf of the respondent Corporation wherein a preliminary objection has been raised that the plaintiff-petitioner filed application exh. 5 for interim injunction in the civil suit. The trial court granted ad-interim injunction against the respondents as prayed for vide its order dated 2.2.2001. The respondent Corporation therefore, preferred Appeal from Order no.30 of 2001 in the District Court, Ahmedabad (Rural) at Gandhinagar. That appeal has been allowed and the interim order dated 8.3.2001 of the trial court has been directed to be vacated. However, the respondents filed a caveat in Revision Application in this Court which the petitioner could have filed against the order dated 31st July, 2001 of the District Court. The petitioner has not filed any Revision Application till this date in this Court. When the petitioner failed to obtain interim relief in the pending suit, it has filed this petition which is an abuse of process of Court. The petition was filed on 7.8.2001 challenging the order dated 23rd January, 2001. As such, the petition is liable to be dismissed on the ground of undue delay and laches and this petition has been filed when the suit was already pending in the trial court. It is an uncontroverted fact and there is no attempt on the part of the petitioner to controvert that two bank guarantee nos. 173/1 for Rs. 2,38,780/- and 169/1 for Rs.3,41,743/- were forged and fake. It is asserted in the petition that some mistake was found by ONGC regarding the said bank guarantees and admitted to explain the forgery as mistake or lapse committed by the employee of the petitioner. In the judgment of the District Court, the act committed by the respondent-petitioner was never considered to be legal and fair and the petitioner has nowhere denied that the above said two bank guarantees produced by it were not forged or fake. It was admitted that it happened due to mistake of some of its employees. The respondent did not produce forged and fake bank guarantees as alleged by the appellant. Describing the submission of forged or fake bank guarantees as mistake by an employee, is a sheer misrepresentation. Another bank guarantee was also filed which was a forged or fake bank guarantee. That fact has been suppressed. There was no question of giving any personal hearing to the petitioner. It was given a notice to explain and substanatiate genuineness and correctness of the bank guarantees dated 30th December, 1996 and 21st February, 1997. The show cause notice dated 8.12.2000 was given to the petitioner as to why business dealing with the petitioner should not be banned. The petitioner filed a reply dated 14.12.2000 through its advocate admitting that due to its employee, there was a mistake in furnishing the bank guarantees. In the reply, no personal hearing was sought for. Even in the letter dated 5.1.2001, the petitioner had not sought for personal hearing but stated that it would like to explain the facts which could be possible by personal discussion. Hence, there was no violation of principles of natural justice. It is also stated that when the bank guarantees were subsequently discovered forged and fake, were accepted by ONGC as the petitioner was not aware of their forged and fake nature. Soon after the bank which has not issued the bank guarantees confirmed that the bank guarantees were forged, action was taken against the petitioner. Furnishing of forged and fake bank guarantees even by mistake of employee which in reality is beyond anybody's imagination, cannot provide any excuse to the petitioner. The impugned order has not been passed by Mr. Prakash Mehta. The impugned order has been passed to protect the interest of ONGC and has nothing to do with what might have transpired between the petitioner and Mr. Prakash Mehta. The action was initiated on the ground that the bank guarantees which were given by the petitioner were fake. By the letter dated 16.5.2000, the petitioner was informed that State Bank of Saurashtra had intimated that the said bank guarantees were not issued by the said bank. The petitioner's explanation was sought about genuineness and correctness of the said bank guarantees. From the reply dated 28th May, 2000 it appears that the petitioner knew that its explanation was not sought merely with reference to the fakeness of any bank guarantee. Even in the show cause notice dated 8.12.2000, it was specifically pointed out that it was found that the bank guarantees were fake and not issued by the State Bank of Saurashtra. The facts mentioned in the show cause notice as well as the contents of the petitioner's reply were considered and then the impugned order has been passed as mentioned therein. The impugned order is not arbitrarily passed as a result of non-application of mind or based on extraneous or irrelevant considerations made in disregard of any irrelevant considerations, biased or violative of Articles 14 and 19 of the Constitution of India. 4. A further affidavit in reply has also been filed by the respondents regarding the question of bias against the petitioner as argued on 24th August, 2001. The allegations of the petitioner that the impugned order was vindictive in nature or to take revenge against the petitioner complaining the ACB about the demand of illegal gratification by Mr. Prakash Mehta are denied. Mr. Prakash Mehta, General Manager on information from the State Bank of Saurashtra on 28th March, 2000 called for information on and passed some order on 13.4.2000 for inquiry in the matter and he found that on expiry of bank guarantees, a letter was written to the contractor on 2.6.1998 extending the validity of the bank guarantee dated 19.8.1999 to which the petitioner did not respond. Another letter was written to the contractor/petitioner on 3.7.1998 with a copy of the letter of the Branch Manager, State Bank of Saurashtra asking the contractor to extend the bank guarantee by 10.7.1998 and warning the contractor that otherwise ONGC will be compelled to ask the bank to encash the bank guarantee. In case of bank guarantee no.173-1, a letter was sent to the contractor on 10.7.1998 asking it to extend the validity of the bank guarantee dated 10.4.1997, otherwise, ONGC would be compelled to ask the bank to encash the above bank guarantee. In July and August, 1998, ONGC official came to know that these bank guarantees were fraudulent. A report was submitted on 26th April, 2000 recommending suitable action against the petitioner. Mr. Prakash Mehta submitted a proposal to write a letter to the petitioner according to the draft submitted and sought confirmation whether ONGC was justified in keeping the bid of the petitioner in abeyance in various tenders. The communication had already taken place prior to the arrest of Mr. Prakash Mehta on 11.8.2000. In fact, on 11.8.2000, Mr. Prakash Mehta had directed to process banning of case against the petitioner and his arrest was made lateron. The contentions taken by the petitioner in its advocate's letter dated 14.12.2000 were denied that the committee was formed as alleged to resolve the issue of bank guarantee. Mr. G.L.Gupta, General Manager has retired and it was confirmed by Mr. K.C.Arora. Mr. G.C. Gupta, Deputy S[uperintending Engineer, now Superintending Engineer and Mr. Satishkumar, Executive Engineer (C and M) now Deputy Superintending Engineer. 5. Heard the learned Senior advocates for the parties and perused the relevant papers on record. 6. The contention of the learned Sr. Advocate Mr. Y.N.Oza for the petitioner is that the impugned order of black-listing the petitioner affects the civil rights of the petitioner and that order can only be passed after giving an opportunity of making a representation or explanation to show cause and opportunity of personal hearing is afforded. Otherwise, it will vitiate and will be in breach of principles of natural justice. He relied on the following case laws. 1. M/s. Erusian Equipment and Chemicals Ltd. vs. State of West Bengal and another reported in AIR 1975, SC, 266. The relevant portion reads as under: "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." 20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into a lawful relationship with the Government for the 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." 2. Joseph Vilangandan vs. The Executive Engineer (P.W.D.), Ernakulam and others reported in AIR 1978, SC 930. The relevant portion reads as under: "18. This being the position, the rule in Erusian Equipment's case (ibid) (AIR 1975 SC 266) will be attracted with full force. While conceding that the State can enter into contract with any person it chooses and no person has a fundamental right to insist that the Government must enter into a contract with him, this Court observed (in the said case) ( at page 269): "black-listing has the effect of preventing a person from the privilege and advantrage 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 black-list." 3. Raghunath Thakur vs. State of Bihar and others reported in AIR 1989, SC, 620. It is held as under: "4. Undisputably, no notice had been given to the appellant of the proposal of blacklisting the appellant. It was contended on behalf of the State Government that there was no requirement in the rule of giving any prior notice before blacklisting any person. In so far as the contention that there is no requirement specifically of giving any notice is concerned, the respondent is right. But it is an implied principle of the rule of law that any order having civil consequences should be passed only after following the principles of natural justice. It has to be realised that blacklisting any person in respect of business ventures has civil consequences for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order. In that view of the matter, the last portion of the order in so far as it directs black-listing of the appellant in respect of future