Delhi High Court Quashes Delisting Order Issued To Entity By Railways Without Show Cause Notice And Reasonable Opportunity To Defend

The Delhi High Court has quashed a delisting order issued to an entity by the Railways without any show cause notice and reasonable opportunity to defend itself observing that the same cannot be sustained in law.

Justice Sanjeev Sachdeva observed that the High Court can exercise it's jurisdiction under Article 226 in such cases where the impugned order is ex facie issued contrary to the guidelines of the Railways and also in violation of principles of natural justice.

The petitioner entity, Eldyne Electro Systems Private Ltd, had approached the Court challenging the order issued by the Railways dated November 8, 2021 whereby it was delisted for the items Multi Section Digital Axle counter and Single section digital axle counter.

Senior Advocate Aman Sinha, appearing for the petitioner, submitted before the Court that no show cause notice was issued to the entity prior to passing of the delisting order as mandated under the guidelines issued by the Research Design and Standard Organisation.

He also apprised the Court about a Temporary Delisting order which was issued in August this year which was challenged before the Calcutta High Court. The Court was informed that the respondent had challenged the said order on the ground of lack of territorial jurisdiction and that judgment has been reserved in the appeal filed by petitioner before a Division Bench.

Therefore, it was the petitioner's case that that the proceedings were independent of the Temporary Delisting order as there is a separate provision in the Respondent's guidelines dealing with Delisting.

The Court was told that the respondent did not have the power to ban a vendor and that the procedure which is prescribed by the Railway Vigilance Manual was not been followed prior to issuance of the banning order in the instant matter.

In view of the aforesaid, it was argued that the order of Delisting amounted to banning the petitioner entity and it virtually amounts to it's civil death as no prior show cause notice or an opportunity of hearing was granted to it.

The petition was opposed by the Respondents on the ground that the Delhi High Court would not have the territorial jurisdiction to entertain the petition as the impugned order was passed by the authority whose office was in Lucknow and not in Delhi. It was also contended that since the investigation was conducted by the Railway Board, Vigilance only in Lucknow and not in Delhi, no part of cause of action had arisen in Delhi.

It was also argued that since the petitioner had already approached the Calcutta High Court, where the judgment was reserved by a Division Bench, the present petition was not maintainable before the Delhi High Court.

Perusing the investigation report of Railway Board Vigilance, the Court took note of the fact that the complaint was received with the Railway Board of Delhi which had then directed an investigation to be conducted by the Railway Board vigilance.

"Clearly the trigger of the investigation was a complaint which was received in Delhi and the investigation which was directed to be conducted by the Railway Board at Delhi. Entire proceedings commenced with the complaint received and the investigation ordered; both of which happened in Delhi. In view of the same, clearly a part of the cause of action has arisen in Delhi giving territorial jurisdiction to this Court," the Court observed.

The Court also was of the view that in the present case no show cause notice was issued to the petitioner entity for Delisting other than for Temporary Delisting.

"Even the impugned order does not refer to the earlier temporary delisting. The impugned order of Delisting does not state that the said order is consequential to the earlier order of Temporary Delisting. Further, the provisions of Para 4.2.3 do not stipulate that Delisting will automatically come into force in case of a Temporary Delisting," the Court added.

It was also observed that the action of Temporary Delisting and that of Delisting are two distinct actions emanating from distinct provisions thereby giving rise to distinct causes of action entitling an entity to challenge them in independent proceedings.

The Court concluded that it would clearly have the jurisdiction to entertain the writ petition as the two actions were distinct and because a part of the cause of action had arisen within the territory of Delhi.

"The order of delisting of a registered contractor in effect amounts to banning of business with the said entity for the reasons that once a contractor is delisted, he would not be in a position to do business with the said entity which has delisted the vendor," the Court observed at the outset.

Further observing that no reasonable opportunity to defend or render an explanation given to the petitioner, the Court said that the impugned action of Delisting could not be sustained as being contrary to the provisions of the QO-D guidelines as well as the Railway Vigilance Manual.

"No doubt this Court, would normally not exercise jurisdiction if there is an alternative remedy but where, ex facie, the impugned order is issued contrary to the guidelines of the respondents and also in violation of the principles of natural justice, this is a fit case where powers under Article 226 of the Constitution of India should be exercised," it said.

Senior Advocate Aman Sinha along with Advocates Gaurav Gupta, Samyak Gangwal and Hilal Haider appeared for the petitioner.

Advocates Rakesh Mittal and Yamini Mittal appeared for the Respondents.

Title: ELDYNE ELECTRO SYSTEM PVT LTD. AND ANR v. UNION OF INDIA & ORS.

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