[Tender] Action Taken In Excess Of Show Cause Notice Violates Principles Of Natural Justice, Untenable: Karnataka High Court

A single judge bench of Justice M Nagaprasanna recently allowed in part the petition filed THE CAP A PIE, questioning the termination of its contract by South Western Railways performing work of collection, washing and ironing of bedroll linen supplied to AC coach passengers in several trains and blacklisting the firm for two years.

The court did not delve into the cancellation of the contract as the tender was withdrawn but it set aside the blacklisting of the firm by the Railways. It said, “If the show cause notice was for a particular purpose and the petitioner had replied for that particular purpose, the order cannot add something more to which the petitioner had no notice. This would be in clear violation of the elementary principle of natural justice namely, “audi alteram partem”, as it is trite that the Authority cannot seek to pass an order upon which, it did not seek to issue notice.”

Case Details:

On May 24, 2022 the South Western Railways issued a notice inviting tender for the aforesaid work which the petitioner is said to be performing. On 17.10.2022 the respondent awarded the contract in favour of the petitioner. In terms of the said order of award of contract, the petitioner requested permission to execute the work at M/s. Laundry Labs India Pvt. Ltd., which was not the one that was necessary in terms of the tender conditions.

Noticing the fact the petitioner did not have appropriate infrastructure and had deliberately misrepresented with regard to the laundry space, the authority issued a notice on 02.11.2022 seeking to show cause as to why the contract of the petitioner should not be terminated.

Pending consideration of the reply, the respondent terminated the contract between the petitioner and the South Western Railways on account of the aforesaid circumstance of the act of the petitioner being in violation of tender conditions. It later transpired that the tender itself was cancelled. However, vide its order dated 10.11.2022 the authority blacklisted the petitioner for a period of 2 years.

Findings:

The bench perused the show cause notice issued to the petitioner and said,

“What can be unmistakably gathered is, the petitioner was asked to show cause as to why the contract awarded to him should not be terminated...If the show cause notice issued to the petitioner is juxtaposed with the order, it would unmistakably depict that it travels beyond the show cause notice. The show cause notice only contained the contents about the termination of contract and not on blacklisting. Therefore, it is a case where the petitioner without being aware is blacklisted. The order of blacklisting comes to the petitioner as a bolt from the blue, as he had no notice prior to the order of blacklisting.”

It relied on Supreme Court's decision in Saci Allied Products Ltd. v. Collector of Central Excise, (2005) 7 SCC 159, where it was held the case that was never canvassed by the revenue to which the appellants therein had no opportunity to meet could not have been made a part of the order of the Tribunal.

Thus the High Court held that the impugned order warrants interference, insofar as it adds blacklisting to its order.

Accordingly it allowed the petition in part and quashed the impugned order to the above extent. However, it clarified that liberty is reserved to the respondent to issue a show cause notice concerning blacklisting of the petitioner.

Case Title: THE CAP A PIE v. The South Western Railways

Case No: WRIT PETITION NO. 22793 OF 2022

Citation: 2023 LiveLaw (Kar) 6

Date of Order: 14-12-2022

Appearance: Advocate Girish V Bhat for petitioner; Advocate B S Venkatanarayana for respondent.

Click Here To Read Order