Show Cause Notice Specifying Grounds For Proposed Action Is Mandatory Before Passing Blacklisting Order: Jharkhand High Court

The Jharkhand High Court has quashed the state prison department's decision to blacklist a trader from supplying any food material to the Divisional Jail, Lohardaga, for five years for being violative of natural justice. Sai Traders had allegedly failed to comply with an official order to supply food in the jail during the lockdown period in 2020.

Justice Rajesh Shankar said the proposed punishment of blacklisting was not communicated to the petitioner and it was only called upon to explain as to why the food materials were not being supplied by it.

"Thus, the said show cause notices cannot be said to be in compliance of the principles of natural justice for passing the order of blacklisting," said the court.

Observing that it is well settled that the power to blacklist is inherent in the party allotting the contract and the same is unqualified, the court said:

“However, if such a decision (of blacklisting order) is taken by the government or its instrumentalities, the same is open to scrutiny on the touchstone of fairness, relevance, natural justice, non-discrimination, equality, reasonableness and proportionality. Serving of show cause notice specifying the grounds on the basis of which an action is proposed to be taken, is a mandatory requirement so as to enable the notice to answer the case before passing the order of blacklisting/banning since the same has not only long lasting civil consequence, but it also tarnishes the blacklisted person’s reputation.”

Sai Traders had filed a writ petition to quash the order issued by the Inspector General of Prison (IGP), Jharkhand, which blacklisted the petitioner for five years. The petition also prayed for quashing an order dated 05.11.2020, issued by the Superintendent of Jail, Divisional Jail, Lohardaga, debarring the petitioner from supplying any food material to the prison with immediate effect, against the work allotted to it for the fourth quarterly period of the contract.

The counsel for the petitioner Advocate Amritansh Vats contended that the petitioner had participated in the tender floated by the Superintendent of Jail and, being the L-1 bidder, was allotted the work of supplying food materials at Lohardaga Jail as an annual contract for a period from 01.04.2019 to 31.03.2020.

The petitioner argued that he had supplied the food materials as per the terms of the contract. During the COVID-19 pandemic, in April 2020, the Superintendent informally directed the petitioner to supply food materials in Lohardaga Jail. However, the petitioner expressed their inability to supply certain food items as the concerned area was under lockdown. He also stated in a letter that their previous annual contract had expired and was neither extended nor allotted afresh through any tender process.

In May 2020, the Superintendent of Jail informed the Inspector General of Prison that the petitioner had shown their inability to supply required food materials and other items for the inmates of the Divisional Jail, Lohardaga, and recommended the initiation of appropriate penal proceedings against them, the court was told.

The petitioner further submitted that during this period, the petitioner supplied 900 Kgs. of flour to Lohardaga Jail without any contract and he could not provide some food item due to unavailability during the lockdown. Thereafter, the petitioner received show cause notices from IGP for allegedly not supplying food materials to Lohardaga Jail.

The counsel for the petitioner also submitted that the impugned order of blacklisting has been passed in violation of the principles of natural justice as no specific show cause for the proposed action of blacklisting has been issued to it.

The respondents submitted that the petitioner was requested to supply food materials to the jail inmates during the lockdown period, even beyond the expiry date of their previous contract but it refused to follow the orders, causing problems for the jail administration. Sai Traders was then served with two show cause notices.

"The petitioner participated in the post facto tender invited for the quarterly period of 01.04.2020 to 30.06.2020 and deliberately quoted lower rates for the items to be supplied so as to pressurize the other suppliers who had supplied the food materials and other items during the lockdown period. The said act of the petitioner caused much inconvenience to the suppliers as well as the jail administration," the respondents said.

It was argued that the IGP blacklisted the petitioner for five years, following the principles of natural justice and proportionality. 

After hearing both the sides, the court referred to Kulja Industries Limited v. Chief General Manager, Western Telecom Project Bharat Sanchar Nigam Limited & Others (2014) 14 SCC 731 wherein the Apex Court held that “blacklisting is subject to judicial review if the same is taken by the State or any of its instrumentalities. This implies that any such decision is open to scrutiny not only on the touchstone of the principles of natural justice but also on the doctrine of proportionality. A fair hearing to the party being blacklisted thus becomes an essential precondition for a proper exercise of the power and a valid order of blacklisting made pursuant thereto. Whether the order itself is reasonable, fair and proportionate to the gravity of the offence, is also examinable by a writ court”.

The court further referred to Gorkha Security Services v. Government (NCT of Delhi) & Ors. (2014) 9 SCC 105, wherein Supreme Court held that the necessity of compliance with the principles of natural justice by giving an opportunity to the person against whom action of blacklisting is sought to be taken has a valid and solid rationale behind it. Many civil and/or evil consequences are involved with the order of blacklisting and it is described as “civil death” of a person who is foisted with the order of blacklisting, said the apex court.

Ruling that the show cause notices issued to Sai Traders cannot be said to be in compliance with the principles of natural justice, Justice Shankar said so far as the allegation of quoting a low price in the tender of the 2nd quarter is concerned, the same was not alleged against the petitioner in the show cause notices and thus the impugned order has been passed in violation of the principles of natural justice on that aspect as well. 

Referring to the case of Vetindia Pharmaceuticals Limited Vs. State of Uttar Pradesh & Anr (2021) 1 SCC 804, the court held that petitioner has already suffered for more than two years after passing of the impugned order and as such, it will not be appropriate to remand the matter to the concerned respondent for passing fresh order in this regard.

Case Title: M/s. Sai Traders versus The State of Jharkhand

Citation: 2023 LiveLaw (Jha) 10

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