The Bihar State Electricity Board ( Now Bsphcl ), Patna v. H.C.L. Info Systems Limited

Patna High Court LPA No.517 of 2013 (2) dt.20-09-2013 Requests were sent not only to M/s Starlite Infotech Ltd. but also to the respondent who allegedly took the defence of price escalation in the market desiring revised rates. The learned Single Judge was of the opinion that the order blacklisting of the respondent was in violation of the principles of natural justice as no show cause notice was given. The letter dated 30.3.2012 was not written by the respondent but by M/s Starlite Infotech Ltd. stating that the respondent was not willing to supply materials in view of increase in rate internationally. While it may be the discretion of the Appellants with whom it would like to enter into a contract, while passing an order for blacklisting in violation of the principles of natural justice, the order dated

29.8.2012 had been communicated to other Electricity Board’s and Power Corporation in the country which would affect the business interest of the respondent. It was also that blacklisting two years was grossly disproportionate as the contract was only for Rs. 19 lacks. Learned counsel for the Appellants sought to persuade us that natural justice cannot be put in any straight jacket formula. M/s Starlite Infotech Ltd. while entering into a contract with the Board had produced a support agreement from the respondent. The latter was fully aware of its obligation to make supplies under the contract. Letters were directly written to the respondent on 24.4.2012 3 Patna High Court LPA No.517 of 2013 (2) dt.20-09-2013 and 29.5.2012 to make supplies but they did not respond. The letters mentioned that if supplies were not made action would be taken. It cannot be urged that no opportunity was given or that natural justice was violated. No fruitful purpose would have been served by giving of a show cause notice when apparently aware of everything, the respondent was not willing to effect supplies. Our jurisdiction while reviewing an order for blacklisting is primarily confined to the decision making process first. If there is error in the decision making process, that is sufficient not to uphold the order. The letters dated 24.2.2012 and 29.5.2012 stated that if the respondent did not make supplies within seven days action will be taken. Undoubtedly, the appellant intended cancellation of the contract as the prime purpose of the communication was to ensure supplies. It could also have included a cause of action for claiming damages regarding extra costs incurred in purchase from another delay in project etc. This fructified when the contract was cancelled on 27.7.2012. The cancellation of the purchase order on account of failure to make supplies within stipulated time under the contract is an entirely different matter from a blacklisting. The latter affects reputation, business and commercial interests. The standard of fairness required at this stage is 4 Patna High Court LPA No.517 of 2013 (2) dt.20-09-2013 far in excess and higher than that required for cancellation of a contract by a government body. At this stage, it is not very relevant whether the explanation that would have been furnished if an opportunity had been given, may or may not have been acceptable to the Board. The issue was complete lack of opportunity to present the stand of the respondent. It was their contention in the writ petition that they had met the officials of the Board and offered to make supplies immediately. The two letters written by the appellant can by no stretch of imagination be construed or understood as a show cause notice for blacklisting. The impugned order dated 29.8.2012 refers to the cancellation order dated

27.7.2012 after a show cause notice and then proceeds to directly blacklist the respondent. Since we are satisfied that the blacklisting itself was in violation of the principles of natural justice, we do not consider it necessary to go into the question whether it is disproportionate or not. In (2007) 14 SCC 517 (Jagdish Mandal v. State of Orissa) it was observed :- “ 22…… Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action.” Likewise, that the two letters before cancellation of the contract like that in the present case cannot be 5 Patna High Court LPA No.517 of 2013 (2) dt.20-09-2013 construed as a show cause notice before blacklisting finds support from (1978) 3 SCC 36 (Joseph Vilangandan v. Executive Engineer (PWD), observing :- “17…. There are no words in the notice which could give a clear intimation to the addressee that it was proposed to debar him from taking any contract, whatever, in future under the Department….In short, the letter (Ex.P-6) dated April 17, 1968 from the Executive Engineer, did not give any clear notice to the appellant that action to debar him from taking in future contract, whatever, under Department or its Ernakulam Division was in contemplation. The appellant was thus not afforded adequate opportunity represent against the impugned action.” In view of the error committed by the appellants in the decision-making process for blacklisting, we find no reason to interfere with the reasoned order of the learned Single Judge. The Appeal is dismissed. (Navin Sinha, J) (Vikash Jain, J) P. Kumar/-