UMC TECHNOLOGIES PRIVATE LIMITED versus FOOD CORPORATION OF INDIA AND ANR.
[2020] 13 S.C.R. 1175, Supreme Court of India, 2020
Outcome: Appeal(s) allowed (Granted)
Segment: Issues
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UMC TECHNOLOGIES PRIVATE LIMITED
v.
FOOD CORPORATION OF INDIA AND ANR.
(Civil Appeal No. 3687 of 2020)
NOVEMBER 16, 2020
[S. ABDUL NAZEER AND B. R. GAVAI, JJ.]
Contract – Termination of – Blacklisting by Corporation –
The Corporation had issued a Bid Document inviting bids for
appointment of a recruitment agency to conduct the process or
recruitment for hiring watchmen – The appellant was declared as
the successful bidder – The appellant conducted a written exam for
eligible aspirants for the post of watchmen with the Corporation –
On the same day a Special Task Force of Police arrested 50 persons,
who were in possession of certain handwritten documents which
prima facie appeared to be the question papers related to the
examination conducted by the appellant – The Corporation issued
a show cause notice dated 10.04.2018 to the appellant and alleged
that the appellant had breached various clauses of the Bid document
– By its order dated 09.01.2019, the Corporation concluded that
the shortcomings/negligence on part of the appellant stood
established beyond any reasonable doubt and proceeded to terminate
its contract with the appellant and also blacklisted the appellant
from participating in any future tenders of the Corporation for a
period of 5 years – Writ petition filed by the appellant before the
High Court was dismissed – Before the Supreme Court, the appellant
submitted that it only seeks to contest the issue of blacklisting and
not the termination of
the contract between the appellant and the
Corporation – Held: A prior show cause notice granting a
reasonable opportunity of being heard is an essential element of all
administrative decision-making and particularly so in decisions
pertaining to blacklisting which entail grave consequences for the
entity being blacklisted – In these cases, furnishing of a valid show
cause notice is critical and a failure to do so would be fatal to any
order of blacklisting pursuant thereto – A show cause notice must
spell out clearly, or its contents be such that it can be clearly inferred
therefrom, that there is intention on the part of the issuer of the
notice to blacklist the noticee – In the instant case, the show cause
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notice makes it clear that the action of blacklisting was neither
expressly proposed nor could it have been inferred from the language
employed by the Corporation in its show cause notice – It was
incumbent on the part of the Corporation to clarify in the show
cause that it intended to blacklist the appellant, so as to provide
adequate and meaningful opportunity to the appellant to show cause
against the same – Therefore, the show cause notice dated
10.04.2018 does not fulfil the requirements of a valid show cause
notice for blacklisting – The Corporations’s order dated 09.01.2019
is quashed only so far as it blacklist the appellant from participating
in future tenders.
Allowing the appeal, the Court
HELD: 1. In the context of blacklisting of a person or an
entity by the state or a state corporation, the requirement of a
valid, particularized and unambiguous show cause notice is
particularly crucial due to the severe consequences of blacklisting
and the stigmatization that accrues to the person/entity being
blacklisted. Here, it may be gainful to describe the concept of
blacklisting and the graveness of the consequences occasioned
by it. Blacklisting has the effect of denying a person or an entity
the privileged opportunity of entering into government contracts.
This privilege arises because it is the State who is the
counterparty in government contracts and as such, every eligible
person is to be afforded an equal
opportunity to participate in
such contracts, without arbitrariness and discrimination. Not only
does blacklisting takes away this privilege, it also tarnishes the
blacklisted person’s reputation and brings the person’s character
into question. Blacklisting also has long-lasting civil
consequences for the future business prospects of the blacklisted
person. [Para 14][1183-E-H; 1184-A]
2. In light of the various Supreme Court decisions, it is
clear that a prior show cause notice granting a reasonable
opportunity of being heard is an essential element of all
administrative decision-making and particularly so in decisions
pertaining to blacklisting which entail grave consequences for
the entity being blacklisted. In these cases, furnishing of a valid
show cause notice is critical and a failure to do so would be fatal
to any order of blacklisting pursuant thereto. [Para 19][1186-B-
C]
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3. The legal position is clear that for a show cause notice to
constitute the valid basis of a blacklisting order, such notice must
spell out clearly, or its contents be such that it can be clearly
inferred therefrom, that there is intention on the part of the issuer
of the notice to blacklist the noticee. Such a clear notice is
essential for ensuring that the person against whom the penalty
of blacklisting is intended to be imposed, has an adequate,
informed and meaningful opportunity to show cause against his
possible blacklisting. [Para 21][1187-E-F]
4. A plain reading of the notice makes it clear that the action
of blacklisting was neither expressly proposed nor could it have
been inferred from the language employed by the Corporation in
its show cause notice. After listing 12 clauses of the “Instruction
to Bidders”, which were part of the Corporation’s Bid Document
dated 25.11.2016, the notice merely contains a vague statement
that in light of the alleged leakage of question papers by the
appellant, an appropriate decision will be taken by the
Corporation. [Para 24][1188-G-H]
5. The mere existence of a clause in the Bid Document,
which mentions blacklisting as a bar against eligibility, cannot
satisfy the mandatory requirement of a clear mention of the
proposed action in the show cause notice. The Corporation’s
notice is completely silent about blacklisting and as such, it could
not have led the appellant to infer that such an action could be
taken
by the Corporation in pursuance of this notice. Had the
Corporation expressed its mind in the show cause notice to black
list, the appellant could have filed a suitable reply for the same.
Therefore, this Court is of the opinion that the show cause notice
dated 10.04.2018 does not fulfil the requirements of a valid show
cause notice for blacklisting. In view of this Court, the order of
blacklisting the appellant clearly traversed beyond the bounds of
the show cause notice which is impermissible in law. As a result,
the consequent blacklisting order dated 09.01.2019 cannot be
sustained. [Para 25][1189-D-F]
Erusian Equipment & Chemicals Ltd. v. State of West
Bengal (1975) 1 SCC 70 : [1975] 2 SCR 674;
Raghunath Thakur v. State of Bihar (1989) 1 SCC 229
: [1988] 3 Suppl. SCR 867; Gorkha Security Services
UMC TECHNOLOGIES PRIVATE LIMITED v. FOOD CORPORATION
OF INDIA AND ANR.
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v. Government (NCT of Delhi) and Ors. (2014) 9 SCC
105 : [2014] 13 SCR 617 – relied on.
Nasir Ahmad v. Assistant Custodian General, Evacuee
Property, Lucknow and Anr. (1980) 3 SCC 1 : [1980]
3 SCR 248 – referred to.
Case Law Reference
[1980] 3 SCR 248 
referred to
Para  13
[1975] 2 SCR 674 
relied on
Para  16
[1988] 3 Suppl. SCR  867
relied on
Para  17
[2014] 13 SCR 617
relied on
Para  18
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3687
of 2020.
From the Judgment and Order dated 13.02.2019 of the High Court
of Madhya Pradesh at Jabalpur in W.P. No. 2778 of 2019.
Gourab Banerji, Sr. Adv., Sahil Tagotra, Subhro Mukherjee, Mohit
Pandey, Ms. Ishita Mishra, Ajit Pudussery, Advs. for the appearing
parties.
The Judgment of the Court was delivered by
S. ABDUL NAZEER, J.
1. Leave granted.
2. This appeal is directed against the order dated 13.02.2019 passed
by the High Court of Madhya Pradesh at Jabalpur in Writ Petition No.
2778 of 2019. By the impugned order, the High Court has dismissed the
writ petition and has upheld the validity of the order dated 09.01.2019
passed by respondent no.1, namely Food Corporation of India (for short
‘the Corporation’) through its Deputy General Manager (Personnel),
who is respondent no. 2 herein, to terminate a contract of service with
the appellant and to blacklist the appellant from participating in any future
tenders of the Corporation for a period of 5 years.
3. The Corporation had
issued a Bid Document on 25.11.2016
inviting bids for appointment of a recruitment agency to conduct the
process of recruitment for hiring watchmen for the Corporation’s office.
The appellant submitted its bid on 21.12.2016 and was eventually declared
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as the successful bidder vide the Corporation’s letter dated 28.03.2017.
After completion of the formalities, the appellant was appointed for a
period of 2 years w.e.f. 14.02.2017 for undertaking the tendered work
of conducting recruitment of watchmen for the Corporation.
4. As part of its work, on 01.04.2018, the appellant conducted a
written exam for eligible aspirants for the post of watchman with the
Corporation at various centres in Madhya Pradesh. On the same day, a
Special Task Force of Bhopal Police arrested 50 persons in Gwalior,
who were in possession of certain handwritten documents which prima
facie appeared to be the question papers related to the examination
conducted by the appellant. The police filed a charge sheet on 03.08.2018
against certain persons. Upon receipt of the above information, the
Corporation issued a show cause notice dated 10.04.2018 to the appellant
informing the appellant about the said arrest and seizure of documents
which appeared to contain question papers related to the examination
conducted by the appellant. This notice alleged that the appellant had
breached various clauses of the Bid Document dated 25.11.2016 on the
ground that it was the sole responsibility of the appellant to prepare and
distribute the question papers as well as conduct the examination in a
highly confidential manner. Several clauses of the Bid Document were
listed in the said notice dated 10.04.2018 and the Corporation alleged
that the
appellant had violated the same due to its abject failure and
clear negligence in ensuring smooth conduct of the examination. The
said notice directed the appellant to furnish an explanation within 15
days, failing which an appropriate ex-parte decision would be taken by
the Corporation.
5. The appellant replied to the aforesaid notice vide its letter dated
12.04.2018 denying any negligence or leak of question papers from its
end. In its communication, the appellant furnished several factual
justifications in support of its position and also requested the Corporation
to make the documents seized by the police available to the appellant for
forensic analysis. These documents were provided to the appellant vide
the Corporation’s letter dated 18.10.2018. The Corporation addressed
another letter dated 22.10.2018 calling upon the appellant to submit its
final reply/explanation. Thereafter, on 27.10.2018, the appellant submitted
an Observation Report-cum-Reply/Explanation which compared the
seized documents with the original question papers and contended that
there were many dissimilarities between the two and thus there had
been no leakage or dissemination of the original question papers.
UMC TECHNOLOGIES PRIVATE LIMITED v. FOOD CORPORATION
OF INDIA AND ANR. [S. ABDUL NAZEER, J.]
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6. By its aforesaid order dated 09.01.2019, the Corporation
concluded that the shortcomings/negligence on part of the appellant stood
established beyond any reasonable doubt and proceeded to terminate its
contract with the appellant and also blacklisted the appellant from
participating in any future tenders of the corporation for a period of 5
years. Further, the appellant’s security deposit with the Corporation was
forfeited and the appellant was directed to execute the unexpired portion
of the contract at its own cost and risk.
7. Aggrieved by the above order of the Corporation, the appellant,
after issuing a legal notice, filed Writ Petition No. 2778 of 2019 before
the High Court. This petition came to be dismissed by the High Court’s
aforesaid order dated 13.02.2019 which is under challenge before us.
8. At the outset, it may be noted that Shri Gourab Banerji, learned
senior counsel for the appellant, has submitted that the appellant only
seeks to contest the issue of blacklisting and not the termination of the
contract between the appellant and the Corporation. Thus, the sole issue
that falls for determination before us is whether the Corporation was
entitled to and justified in blacklisting the appellant for 5 years from
participating in its future tenders.
9. Before delving into the contentions of the parties, it would be
useful to extract some of the provisions of the Corporation’s Bid
Document dated
25.11.2016 which would be material to determining the
validity of the blacklisting order dated 09.01.2019:
“INSTRUCTIONS TO BIDDERS
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10. DISQUALIFICATION CONDITIONS: Bidder who have
been blacklisted or otherwise debarred by FCI or central/
state Govt. or any central/ State PSU / Statutory Corporations,
will be ineligible during the period of such blacklisting.
10.1 Any Bidder whose contract with FCI or central/state
Govt. or any central/State PSU/Statutory Corporations has
been terminated before the expiry of the contract period for
breach of any terms and conditions at any point of time during
the last five years, shall be ineligible.
10.2 Bidder whose Earnest Money Deposit and/or Security
Deposit have been forfeited by the FCI or central/state Govt.
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or any central/State PSU/Statutory Corporations, during the
last five years, for breach of any terms and conditions, shall
be ineligible.
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25. CORRUPT PRACTICES:
…
25.4 Any corrupt practice indulged by the agency or any of
its employee at any of the stages of the recruitment including
preparation of the question paper, distribution of question
paper, conducting of the exams, valuation of the answer
sheets, declaration of results etc. shall lead to immediate
cancellation of the contact and the agency shall be liable for
appropriate legal action without prejudice to any other clause
in the contract.
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42. TERMINATION OF CONTRACT:
42.1 By Corporation
…
(ii) The FCI shall also have, without prejudice to other rights
and remedies, the right in the event of breach by the Bidder
of any of the terms and conditions of the contract, or failing
to observe any of the provisions, obligations governing the
contract, to terminate the contract forthwith and to get the
work done for the unexpired period of the contract at the
risk and cost of the Agency and to forfeit the Security Deposit
or any part thereof for recovery of all losses, damages, costs
and expenses which may be incurred by FCI consequent to
such termination and / or in completing the assignment. FCI
may also effect recovery from other sums then due to the
Agency or which at any time thereafter may become due under
this or any other contract with FCI. In case the sum is not
sufficient
to cover the full amounts recoverable, the Agency
shall pay FCI on demand the entire remaining balance due.
(iii) FCI may at any time without assigning any reason
terminate the contract without any liability by giving 7 working
days’ notice to the bidder.”
UMC TECHNOLOGIES PRIVATE LIMITED v. FOOD CORPORATION
OF INDIA AND ANR. [S. ABDUL NAZEER, J.]
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10. On behalf of the appellant, it was submitted by Shri Banerji
that the Corporation had no power under the above quoted or any other
provisions of the Bid Document dated 25.11.2016 to blacklist the appellant.
It was argued that above quoted Clause 10 titled “Disqualifications
Conditions”, which has been relied upon by the Corporation, merely lays
down eligibility criteria and does not grant any power of future blacklisting.
It was further alleged that the said clause was also not mentioned in the
show cause notice dated 10.04.2018 issued by the Corporation. The
said show cause notice was also impinged upon by the appellant by
submitting that it failed to meet the requirements of natural justice as it
neither mentioned the grounds necessitating action nor specified what
actions were proposed to be taken. Thus, Shri Banerji submitted that in
the absence of a valid show cause notice, the consequent blacklisting
order cannot be sustained. He further highlighted the outsized impact of
the Corporation’s impugned order on the appellant in as much as the
Corporation’s branches in other States as well as other government
corporations have now issued as many as 5 notices to the appellant to
cancel contracts or prevent the appellant from participating in their tender
process and have also forfeited or withheld outstanding payments and
security deposits. He argued that due to the domino effect of the
Corporation’s
blacklisting of the appellant, the appellant has unreasonably
suffered 5 punishments at the hands of the Corporation which is
disproportionate and tantamounts to the civil death of the appellant.
11. On the other hand, Shri Ajit Pudussery, the learned counsel
appearing on behalf of the Corporation argued that due to the negligence
of the appellant, the entire recruitment process had to be scrapped and
the same has deprived several applicants of employment and undermined
the confidence of the public in the recruitment process of the Corporation.
In relation to the issue of blacklisting, he submitted that since the appellant
had breached the terms of the contract by leaking the question papers
for the examination, it was not in public interest to permit it to participate
in future tenders. He further submitted that the appellant must have
been aware of the possibility of the punishment of blacklisting as the
same was provided for in the Bid Document. Thus, it was argued that
since the blacklisting order was made as per the Bid Document and
after issuance of a show cause notice, to which the appellant was granted
ample time to reply to, the Corporation’s impugned blacklisting order
dated 09.01.2019 cannot be challenged.
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12. We have given our anxious consideration to the submissions
made by the learned counsel at the Bar on behalf of the parties. In our
opinion, the validity of the impugned order of the Corporation dated
09.01.2019, so far as the blacklisting of the appellant thereunder is
concerned, would in turn be determined by the validity of the underlying
show cause notice dated 10.04.2018 issued by the Corporation to the
appellant.
13. At the outset, it must be noted that it is the first principle of
civilised jurisprudence that a person against whom any action is sought
to be taken or whose right or interests are being affected should be
given a reasonable opportunity to defend himself. The basic principle of
natural justice is that before adjudication starts, the authority concerned
should give to the affected party a notice of the case against him so that
he can defend himself. Such notice should be adequate and the grounds
necessitating action and the penalty/action proposed should be mentioned
specifically and unambiguously. An order travelling beyond the bounds
of notice is impermissible and without jurisdiction to that extent.  This
Court in Nasir Ahmad v. Assistant Custodian General, Evacuee
Property, Lucknow and Anr.,1 has held that it is essential for the notice
to specify the particular grounds on the basis of which an action is
proposed to be taken so as to enable the noticee to answer the case
against him. If these conditions are not satisfied, the
person cannot be
said to have been granted any reasonable opportunity of being heard.
14. Specifically, in the context of blacklisting of a person or an
entity by the state or a state corporation, the requirement of a valid,
particularized and unambiguous show cause notice is particularly crucial
due to the severe consequences of blacklisting and the stigmatization
that accrues to the person/entity being blacklisted. Here, it may be gainful
to describe the concept of blacklisting and the graveness of the
consequences occasioned by it. Blacklisting has the effect of denying a
person or an entity the privileged opportunity of entering into government
contracts. This privilege arises because it is the State who is the
counterparty in government contracts and as such, every eligible person
is to be afforded an equal opportunity to participate in such contracts,
without arbitrariness and discrimination. Not only does blacklisting takes
away this privilege, it also tarnishes the blacklisted person’s reputation
and brings the person’s character into question. Blacklisting also has
UMC TECHNOLOGIES PRIVATE LIMITED v. FOOD CORPORATION
OF INDIA AND ANR. [S. ABDUL NAZEER, J.]
1 (1980) 3 SCC 1.
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long-lasting civil consequences for the future business prospects of the
blacklisted person.
15. In the present case as well, the appellant has submitted that
serious prejudice has been caused to it due to the Corporation’s order of
blacklisting as several other government corporations have now
terminated their contracts with the appellant and/or prevented the
appellant from participating in future tenders even though the impugned
blacklisting order was, in fact, limited to the Corporation’s Madhya
Pradesh regional office. This domino effect, which can effectively lead
to the civil death of a person, shows that the consequences of blacklisting
travel far beyond the dealings of the blacklisted person with one particular
government corporation and in view thereof, this Court has consistently
prescribed strict adherence to principles of natural justice whenever an
entity is sought to be blacklisted.
16. The severity of the effects of blacklisting and the resultant
need for strict observance of the principles of natural justice before
passing an order of blacklisting were highlighted by this Court in Erusian
Equipment & Chemicals Ltd. v. State of West Bengal2 in the following
terms:
“12. … The order of blacklisting 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 blacklisting. 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.
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15. … 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 black lists are instruments of coercion.
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2 (1975) 1 SCC 70.
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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.”
17. Similarly, this Court in Raghunath Thakur v. State of Bihar,3
struck down an order of blacklisting for future contracts on the ground
of non-observance of the principles of natural justice. The relevant extract
of the judgement in that case is as follows:
“4. …  [I]t 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 consequence 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.”
18. This Court in Gorkha Security Services v. Government (NCT
of Delhi) and Ors.4 has described blacklisting as being equivalent to the
civil death of a person because blacklisting is stigmatic in nature and
debars a
person from participating in government tenders thereby
precluding him from the award of government contracts. It has been
held thus:
“16. It is a common case of the parties that the blacklisting
has to be preceded by a show-cause notice. Law in this regard
is firmly grounded and does not even demand much
amplification. The necessity of compliance with the principles
of natural justice by giving the opportunity to the person
against whom action of blacklisting is sought to be taken has
a valid and solid rationale behind it. With blacklisting, many
civil and/or evil consequences follow. It is described as “civil
UMC TECHNOLOGIES PRIVATE LIMITED v. FOOD CORPORATION
OF INDIA AND ANR. [S. ABDUL NAZEER, J.]
3 (1989) 1 SCC 229.
4 (2014) 9 SCC 105.
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death” of a person who is foisted with the order of blacklisting.
Such an order is stigmatic in nature and debars such a person
from participating in government tenders which means
precluding him from the award of government contracts.”
19. In light of the above decisions, it is clear that a prior show
cause notice granting a reasonable opportunity of being heard is an
essential element of all administrative decision-making and particularly
so in decisions pertaining to blacklisting which entail grave consequences
for the entity being blacklisted. In these cases, furnishing of a valid show
cause notice is critical and a failure to do so would be fatal to any order
of blacklisting pursuant thereto.
20. In the present case, the factum of service of the show cause
notice dated 10.04.2018 by the Corporation upon the appellant is not in
dispute. Rather, what Shri Banerji has argued on behalf of the appellant
is that the contents of the said show cause notice were not such that the
appellant could have anticipated that an order of blacklisting was being
contemplated by the Corporation. Gorkha Security Services (supra) is
a case where this Court had to decide whether the action of blacklisting
could have been taken without specifically proposing/contemplating such
an action in the show-cause notice. For this purpose, this Court laid
down the below guidelines as to the contents of a show cause notice
pursuant to which
adverse action such as blacklisting may be adopted:
“Contents of the show-cause notice
21. 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 blacklisting, this
requirement becomes all the more imperative, having regard
to the fact that it is harshest possible action.
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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 agent, 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 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 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 clearly and
safely be discerned from the reading thereof, that would be
sufficient to meet this requirement.”
21. Thus, from the above discussion, a clear legal position emerges
that for a show cause notice to constitute the valid basis of a blacklisting
order, such notice must spell out clearly, or its contents be such that it
can be clearly inferred therefrom, that there is intention on the part of
the issuer of the notice to blacklist the noticee. Such a clear notice is
essential for ensuring that the person against whom the penalty of
blacklisting is
intended to be imposed, has an adequate, informed and
meaningful opportunity to show cause against his possible blacklisting.
22. To test whether the above stipulations as to the contents of
the show cause have been satisfied in the present case, it may be useful
to extract the relevant portion of the said show cause notice dated
10.04.2018 wherein the Corporation specified the actions that it might
adopt against the appellant:
“Whereas, the above cited clauses are only indicative & not
exhaustive.
Whereas, it is quite evident from the sequence of events that
M/s U.MC Technologies Pvt. Ltd, Kolkata has violated the
UMC TECHNOLOGIES PRIVATE LIMITED v. FOOD CORPORATION
OF INDIA AND ANR. [S. ABDUL NAZEER, J.]
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condition/clauses governing the contract due to its abject
failure & clear negligence in ensuring smooth conduct of
examination. As it was the sole responsibility of the agency to
keep the process of preparation & distribution of question
paper and conducting of exam in highly confidential manner,
the apparent leak point towards, acts of omission &
commission on the part of M/S UMC Technologies Ltd.
Kolkata.
Whereas, M/S UMC Technologies Pvt. Ltd. Kolkata is hereby
provided an opportunity to explain its Position in the matter
before suitable decision is taken as per T&C of MTF. The
explanation if any should reach this office within a period of
15 days of receipt of this notice falling which appropriate
decision shall be taken. ex-parte as per terms and conditions
mentioned in MTF without prejudice to any other legal rights
& remedies available with the corporation.”
23. It is also necessary to highlight the order dated 09.01.2019
passed by the Corporation in pursuant to the aforesaid notice, the operative
portion of which reads as under:
“After having examined the entire matter in detail, the
shortcomings/negligence on the part of M/s UMC
Technologies Pvt. Ltd. stands established beyond any
reasonable doubt. Now, therefore in accordance with clause
42.1(II) of the governing MTF, the competent authority hereby
terminates the contract at the risk and cost of the Agency. As
per Clause No. 10.1 & 10.2 the said M/s UMC
Technologies
Pvt. Ltd. is hereby debarred from participating in any future
tenders of the corporation for a period of Five years. Further,
the Security Deposit too stands forfeited as per clause 15.6
of MTF.  This order is issued without prejudice to any other
legal remedy available with FCI to safeguard its interest.”
24. A plain reading of the notice makes it clear that the action of
blacklisting was neither expressly proposed nor could it have been inferred
from the language employed by the Corporation in its show cause notice.
After listing 12 clauses of the “Instruction to Bidders”, which were part
of the Corporation’s Bid Document dated 25.11.2016, the notice merely
contains a vague statement that in light of the alleged leakage of question
papers by the appellant, an appropriate decision will be taken by the
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Corporation. In fact, Clause 10 of the same Instruction to Bidders section
of the Bid Document, which the Corporation has argued to be the source
of its power to blacklist the appellant, is not even mentioned in the show
cause notice. While the notice clarified that the 12 clauses specified in
the notice were only indicative and not exhaustive, there was nothing in
the notice which could have given the appellant the impression that the
action of blacklisting was being proposed. This is especially true since
the appellant was under the belief that the Corporation was not even
empowered to take such an action against it and since the only clause
which mentioned blacklisting was not referred to by the Corporation in
its show cause notice. While the following paragraphs deal with whether
or not the appellant’s said belief was well-founded, there can be no
question that it was incumbent on the part of the Corporation to clarify in
the show cause notice that it intended to blacklist the appellant, so as to
provide adequate and meaningful opportunity to the appellant to show
cause against the same.
25. The mere existence of a clause in the Bid Document, which
mentions blacklisting as a bar against eligibility, cannot satisfy the
mandatory requirement of a clear mention of the proposed action in the
show cause notice. The Corporation’s notice is completely silent about
blacklisting and as such, it could not have led the appellant to infer that
such an action
could be taken by the Corporation in pursuance of this
notice. Had the Corporation expressed its mind in the show cause notice
to black list, the appellant could have filed a suitable reply for the same.
Therefore, we are of the opinion that the show cause notice dated
10.04.2018 does not fulfil the requirements of a valid show cause notice
for blacklisting. In our view, the order of blacklisting the appellant clearly
traversed beyond the bounds of the show cause notice which is
impermissible in law. As a result, the consequent blacklisting order dated
09.01.2019 cannot be sustained.
26. In view of our conclusion that the blacklisting order dated
09.01.2019 passed by the Corporation is contrary to the principles of
natural justice, it is unnecessary for us to consider the other contentions
of the learned counsel for the appellant. Having regard to the peculiar
facts and circumstances of the present case, we deem it appropriate not
to remit the matter to the Corporation for fresh consideration.
27. For the foregoing reasons, the appeal succeeds and it is
accordingly allowed. The order dated 13.02.2019 passed by the High
UMC TECHNOLOGIES PRIVATE LIMITED v. FOOD CORPORATION
OF INDIA AND ANR. [S. ABDUL NAZEER, J.]
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SUPREME COURT REPORTS
[2020] 13 S.C.R.
Court is set aside. The Corporation’s order dated 09.01.2019 is hereby
quashed only so far as it blacklists the appellant from participating in
future tenders. The parties will bear their own costs.
28. Pending application(s), if any, shall stand disposed of.
Ankit Gyan
Appeal allowed.