Union Of India And Another v. Counsel for

counsel appearing for the petitioners and Shri Sudarshan Singh, learned Advocate appearing for respondent nos.1 and 2.

2. By means of this petition under Article 226 of the Constitution, petitioner has assailed the order dated 29.8.2024 issued by respondent no.2 rescinding the contract agreement of the petitioner dated 19.7.2024 mid term.

3. At the very outset, learned counsel for the petitioner submits that petitioner does not want to press the petition insofar as the order impugned rescinds the contract of the petitioner mid term. He is confining his prayer in this writ petition to the extent that the order debars petitioner from future participation in the tender proceedings, may be quashed.

4. It is contended that the contract was offered to the petitioner pursuant to the award of tender on 19.7.2024 for a period of four years to end on

25.07.2028, however, the contract agreement has been terminated mid term under the order impugned and further petitioner has been debarred from participating in future tender proceedings for next two years. Specific plea has been taken in paragraph-17 of the writ petition that no show cause notice was issued to the petitioner prior to terminating the contract and debarring the petitioner from participation in future tender proceedings. 2 WRIC No. 31930 of 2025

5. Per contra, it is argued by Shri Sudarshan Singh, learned Advocate appearing for the concerned respondents that petitioner was served with the show cause notice which was seven days notice on 16.8.2025 but the petitioner failed to submit reply and hence the order impugned has come to be passed. He submits that specific reply has been made vide paragraph-11 of the counter affidavit to paragraph-17 of the writ petition treating the averments made in the paragraph-17 of the writ petition to be misconceived, inasmuch as the railway reserves its right to terminate the contract mid term and also ban the firm.

6. Upon a pointed query being made, Shri Sudarshan Singh, learned counsel sought to defend the order impugned by placing the relevant determination of contract clauses before the Court which have been brought on record by means of the writ petition.

7. From perusal of the clause-7.4 "Determination of Contract owning to default of contractor", we find that following conditions have been prescribed for terminating the contract mid term : "7.4 Determination of Contract Owing to Default of Contractor If the Contractor should - (a) Become bankrupt or insolvent, or (b) Make an arrangement with of assignment in favour of her creditors, or agree to carry out the contract under a Committee of Inspection of her creditors, or (c) Being a Company or Corporation, go into liquidation (other than a voluntary liquidation for the purposes of amalgamation or reconstruction), or (d) Have an execution levied on her goods or property on the services, or (e) Assign the contract or any part thereof otherwise than as provided in Clause 4.5 of these Conditions, or (f) Abandon the contract, or (g) Persistently disregard the instructions of the Manager, or contravene any provisions of the contract, or (h) Fall to adhere to the agreed programme of work by a margin of 10% of the stipulated period, or 3 WRIC No. 31930 of 2025 (i) Have been imposed with maximum cumulative penalty as per Clause 4.17.1, or (j) Fail to remove materials from the site or to pull down and rectify service wherever applicable after receiving from the Manager notice to the effect that the said materials (k) Have been condemned or rejected under Clause 4.25, 4.27 and 4.28 of these Conditions, or (l) Fail to take steps to employ competent or additional staff and labour as required under Clause 4.26 of the Conditions, or (m) Fail to afford the Manager or Manager's representative proper facilities for inspecting the services or any part thereof as required under Clause 4.29 of the Conditions, or (n) Promise, offer or give any bribe, commission, gift or advantage either herself or through her partner, agent or servant to any officer or employee of the Railway or to any person on her or on their behalf in relation to the execution of this or any other contract with this Railway. (0) At any time after the Bid relating to the contract, has been signed and submitted by the Contractor, being a partnership firm admits as one of its partners or employees under it, or being an incorporated company elect or nominate or allow to act as one of its directors or employee under it in any capacity whatsoever, any retired officer of the Gazetted rank or any other retired Gazetted officer working before her retirement, whether in the executive or administrative capacity, or whether holding any pensionable post or not, in the Railways for the time being owned and administered by the President of India before the expiry of one year from the date of retirement from the said service of such officer, unless such officer has obtained permission from the President of India or any officer duly authorised by her in this behalf, to become a partner or a director or to take employment under the contract as the case may be, or (p) Fail to give at the time of submitting the said bid: (i) The correct information as to the date of retirement of such retired officer from the said service, or as to whether any such retired officer was under the employment of the Contractor at the time of submitting the said Bid, or (ii) The correct information as to such officers obtaining permission to take employment under the Contractor, or (iii) Being a partnership firm, the correct information as to, whether any of its partners was such a retired officer, or (iv) Being in incorporated company, correct information as to whether any of its directors was such a relired officer, or (v) Being such a retired officer suppress and not disclose at the time of submitting the said Bid the fact of her being such a retired officer or make at the time of submitting the said Bid a wrong statement in relation to her obtaining permission to take the 4 WRIC No. 31930 of 2025 contract or if the Contractor be a partnership firm or an incorporated company to be a partner or director of such firm or company as the case may be or to seek employment under the Contractor. Then and in any of the said clause, the manger on behalf of the Railway may serve the Contractor with notices stipulated in the clauses 7.4.1, 7.4.2 & 7.4.3." (emphasis added)

8. From the perusal of the notice, it transpires that clause 7.4(f) has been taken into account for determining the contract of the petitioner. However, upon close examination of the said clause, we find that it does not provide any such power for banning a firm from future participation in tender proceedings on account of determination of contract.

9. We repeatedly raised query to Mr. Sudarshan Singh, learned counsel appearing for the concerned respondent as to how the order banning the firm has come to be passed but he could not give any reply.

10. From the perusal of the seven days notice issued, we do not find there to be any recital to the effect that notice was meant also to seek explanation from the petitioner as to why the firm of the petitioner may not be banned for future participation in the tender proceedings.

11. Thus, averments made in paragraph-17 of the writ petition remained undenied or at least there is no supportive material before the Court brought on record by means of the counter affidavit to demonstrate that petitioner was ever served with a notice much less a show cause notice seeking his reply as to the proposed action of banning it for future participation in the tender proceedings. For ready reference we are reproducing seven days notice in this order : 7 DAYS NOTICE NORTH CENTRAL RAILWAY (Without Prejudice) No.: RS/Mech/Depot Cleaning/CNB/23 Date:

16.08.2024 Mech. Branch, DRM office, Nawab Yusuf Road, Prayagraj -211001 Email: [email protected] 5 WRIC No. 31930 of 2025 M/s BHUPENDRA SINGH, 2508,E W S.PANKI ROAD AWAS VIKAS-3, KALYANPUR, KANPUR, UTTAR PRADESH-208017 Email- [email protected] Dear Madam/Sir, Contract Agreement No. GEMC-511687778547447 Dated

19.07.2024 In connection with failure to start the work of Comprehensive work of Mechanized/Manual Cleaning of Kanpur Coaching Depot and premises area for the period of Four Years and your letter dated 29.07.2024 for unability to start the work.

1. Performance Notice under Clause 7.4 of General Conditions of Contract was given to you under this office letter of even no., dated

06.08.2024 but you have taken no action to commence the services/improve the quality of the services to the specified standards.

2. You are hereby given 7 days' notice in terms of Clause 7.4 of General Conditions of Contract to commence the service to make good the default, failing which further action as provided in Clause 7.4 of the General Conditions of Contract viz. to terminate your Contract and complete the balance services without your participation will be taken.

3. If your performance does not improve, on expiry of this period, a notice for termination of the above contract shall be issued to you under which your contract shall stand rescinded and the services under this contract will be carried out independently without your participation and your Performance Guarantee shall also be encashed/ forfeited and consequences which may please be noted. Kindly acknowledge receipt. (emphasis added) 6 WRIC No. 31930 of 2025

12. It, therefore, clearly transpires that petitioner was not given any opportunity of hearing in the matter by way of asking for his explanation to the proposed action of banning the firm for future participation in tender proceedings.

13. In fact, as the seven days notice discloses, there was no such action proposed at the end of the respondents while asking the petitioner to submit explanation regarding abandonment of contract. Since the petitioner himself has withdrawn the petition against the act of the respondent in rescinding the contract mid term, we find merit in the submission advanced by the learned counsel for the petitioner that ought not to have banned petitioner bank for future participation in tender proceedings without notice and opportunity of hearing. In the case of UMC Technologies Private Limited v. Food Corporation of India and another (2021) 2 SCC 551, vide paragraph 13, 14 and 19, the Court has held that : "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 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 7 WRIC No. 31930 of 2025 to participate government contracts and as such, every eligible person is to be afforded an equal opportunity 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. ......

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."

14. In the circumstances, the part of the order impugned that bans the petitioner from future participation in tender proceedings is hereby quashed.

15. However, it is left open for the respondents to give notice to the petitioner afresh to pass appropriate orders, if so desired. October 15, 2025 Shiv (Swarupama Chaturvedi,J.) (Ajit Kumar,J.) SHIV KUMAR SHARMA High Court of Judicature at Allahabad

counsel appearing for the petitioners and Shri Sudarshan Singh, learned Advocate appearing for respondent nos.1 and 2.

2. By means of this petition under Article 226 of the Constitution, petitioner has assailed the order dated 29.8.2024 issued by respondent no.2 rescinding the contract agreement of the petitioner dated 19.7.2024 mid term.

3. At the very outset, learned counsel for the petitioner submits that petitioner does not want to press the petition insofar as the order impugned rescinds the contract of the petitioner mid term. He is confining his prayer in this writ petition to the extent that the order debars petitioner from future participation in the tender proceedings, may be quashed.

4. It is contended that the contract was offered to the petitioner pursuant to the award of tender on 19.7.2024 for a period of four years to end on

25.07.2028, however, the contract agreement has been terminated mid term under the order impugned and further petitioner has been debarred from participating in future tender proceedings for next two years. Specific plea has been taken in paragraph-17 of the writ petition that no show cause notice was issued to the petitioner prior to terminating the contract and debarring the petitioner from participation in future tender proceedings. 2 WRIC No. 31930 of 2025

5. Per contra, it is argued by Shri Sudarshan Singh, learned Advocate appearing for the concerned respondents that petitioner was served with the show cause notice which was seven days notice on 16.8.2025 but the petitioner failed to submit reply and hence the order impugned has come to be passed. He submits that specific reply has been made vide paragraph-11 of the counter affidavit to paragraph-17 of the writ petition treating the averments made in the paragraph-17 of the writ petition to be misconceived, inasmuch as the railway reserves its right to terminate the contract mid term and also ban the firm.

6. Upon a pointed query being made, Shri Sudarshan Singh, learned counsel sought to defend the order impugned by placing the relevant determination of contract clauses before the Court which have been brought on record by means of the writ petition.

7. From perusal of the clause-7.4 "Determination of Contract owning to default of contractor", we find that following conditions have been prescribed for terminating the contract mid term : "7.4 Determination of Contract Owing to Default of Contractor If the Contractor should - (a) Become bankrupt or insolvent, or (b) Make an arrangement with of assignment in favour of her creditors, or agree to carry out the contract under a Committee of Inspection of her creditors, or (c) Being a Company or Corporation, go into liquidation (other than a voluntary liquidation for the purposes of amalgamation or reconstruction), or (d) Have an execution levied on her goods or property on the services, or (e) Assign the contract or any part thereof otherwise than as provided in Clause 4.5 of these Conditions, or (f) Abandon the contract, or (g) Persistently disregard the instructions of the Manager, or contravene any provisions of the contract, or (h) Fall to adhere to the agreed programme of work by a margin of 10% of the stipulated period, or 3 WRIC No. 31930 of 2025 (i) Have been imposed with maximum cumulative penalty as per Clause 4.17.1, or (j) Fail to remove materials from the site or to pull down and rectify service wherever applicable after receiving from the Manager notice to the effect that the said materials (k) Have been condemned or rejected under Clause 4.25, 4.27 and 4.28 of these Conditions, or (l) Fail to take steps to employ competent or additional staff and labour as required under Clause 4.26 of the Conditions, or (m) Fail to afford the Manager or Manager's representative proper facilities for inspecting the services or any part thereof as required under Clause 4.29 of the Conditions, or (n) Promise, offer or give any bribe, commission, gift or advantage either herself or through her partner, agent or servant to any officer or employee of the Railway or to any person on her or on their behalf in relation to the execution of this or any other contract with this Railway. (0) At any time after the Bid relating to the contract, has been signed and submitted by the Contractor, being a partnership firm admits as one of its partners or employees under it, or being an incorporated company elect or nominate or allow to act as one of its directors or employee under it in any capacity whatsoever, any retired officer of the Gazetted rank or any other retired Gazetted officer working before her retirement, whether in the executive or administrative capacity, or whether holding any pensionable post or not, in the Railways for the time being owned and administered by the President of India before the expiry of one year from the date of retirement from the said service of such officer, unless such officer has obtained permission from the President of India or any officer duly authorised by her in this behalf, to become a partner or a director or to take employment under the contract as the case may be, or (p) Fail to give at the time of submitting the said bid: (i) The correct information as to the date of retirement of such retired officer from the said service, or as to whether any such retired officer was under the employment of the Contractor at the time of submitting the said Bid, or (ii) The correct information as to such officers obtaining permission to take employment under the Contractor, or (iii) Being a partnership firm, the correct information as to, whether any of its partners was such a retired officer, or (iv) Being in incorporated company, correct information as to whether any of its directors was such a relired officer, or (v) Being such a retired officer suppress and not disclose at the time of submitting the said Bid the fact of her being such a retired officer or make at the time of submitting the said Bid a wrong statement in relation to her obtaining permission to take the 4 WRIC No. 31930 of 2025 contract or if the Contractor be a partnership firm or an incorporated company to be a partner or director of such firm or company as the case may be or to seek employment under the Contractor. Then and in any of the said clause, the manger on behalf of the Railway may serve the Contractor with notices stipulated in the clauses 7.4.1, 7.4.2 & 7.4.3." (emphasis added)

8. From the perusal of the notice, it transpires that clause 7.4(f) has been taken into account for determining the contract of the petitioner. However, upon close examination of the said clause, we find that it does not provide any such power for banning a firm from future participation in tender proceedings on account of determination of contract.

9. We repeatedly raised query to Mr. Sudarshan Singh, learned counsel appearing for the concerned respondent as to how the order banning the firm has come to be passed but he could not give any reply.

10. From the perusal of the seven days notice issued, we do not find there to be any recital to the effect that notice was meant also to seek explanation from the petitioner as to why the firm of the petitioner may not be banned for future participation in the tender proceedings.

11. Thus, averments made in paragraph-17 of the writ petition remained undenied or at least there is no supportive material before the Court brought on record by means of the counter affidavit to demonstrate that petitioner was ever served with a notice much less a show cause notice seeking his reply as to the proposed action of banning it for future participation in the tender proceedings. For ready reference we are reproducing seven days notice in this order : 7 DAYS NOTICE NORTH CENTRAL RAILWAY (Without Prejudice) No.: RS/Mech/Depot Cleaning/CNB/23 Date:

16.08.2024 Mech. Branch, DRM office, Nawab Yusuf Road, Prayagraj -211001 Email: [email protected] 5 WRIC No. 31930 of 2025 M/s BHUPENDRA SINGH, 2508,E W S.PANKI ROAD AWAS VIKAS-3, KALYANPUR, KANPUR, UTTAR PRADESH-208017 Email- [email protected] Dear Madam/Sir, Contract Agreement No. GEMC-511687778547447 Dated

19.07.2024 In connection with failure to start the work of Comprehensive work of Mechanized/Manual Cleaning of Kanpur Coaching Depot and premises area for the period of Four Years and your letter dated 29.07.2024 for unability to start the work.

1. Performance Notice under Clause 7.4 of General Conditions of Contract was given to you under this office letter of even no., dated

06.08.2024 but you have taken no action to commence the services/improve the quality of the services to the specified standards.

2. You are hereby given 7 days' notice in terms of Clause 7.4 of General Conditions of Contract to commence the service to make good the default, failing which further action as provided in Clause 7.4 of the General Conditions of Contract viz. to terminate your Contract and complete the balance services without your participation will be taken.

3. If your performance does not improve, on expiry of this period, a notice for termination of the above contract shall be issued to you under which your contract shall stand rescinded and the services under this contract will be carried out independently without your participation and your Performance Guarantee shall also be encashed/ forfeited and consequences which may please be noted. Kindly acknowledge receipt. (emphasis added) 6 WRIC No. 31930 of 2025

12. It, therefore, clearly transpires that petitioner was not given any opportunity of hearing in the matter by way of asking for his explanation to the proposed action of banning the firm for future participation in tender proceedings.

13. In fact, as the seven days notice discloses, there was no such action proposed at the end of the respondents while asking the petitioner to submit explanation regarding abandonment of contract. Since the petitioner himself has withdrawn the petition against the act of the respondent in rescinding the contract mid term, we find merit in the submission advanced by the learned counsel for the petitioner that ought not to have banned petitioner bank for future participation in tender proceedings without notice and opportunity of hearing. In the case of UMC Technologies Private Limited v. Food Corporation of India and another (2021) 2 SCC 551, vide paragraph 13, 14 and 19, the Court has held that : "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 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 7 WRIC No. 31930 of 2025 to participate government contracts and as such, every eligible person is to be afforded an equal opportunity 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. ......

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."

14. In the circumstances, the part of the order impugned that bans the petitioner from future participation in tender proceedings is hereby quashed.

15. However, it is left open for the respondents to give notice to the petitioner afresh to pass appropriate orders, if so desired. October 15, 2025 Shiv (Swarupama Chaturvedi,J.) (Ajit Kumar,J.) SHIV KUMAR SHARMA High Court of Judicature at Allahabad