Summary of ruling :
In The High Court of Patna
CWJC No. 20965 of 2012
Decided on 18.02.2013
Parties : HCL Infosystems Ltd. (Appellant, Petitioner)
Vs.
The Bihar State Electricity Board, Patna & Ors. (Respondent)
Brief facts of the case : –
The Board wanted to purchase computers.
HCL authorised M/s Starlite Infotech Ltd. to quote and conclude the contract with the Board.
Contract entered between the Board (1st party) and Starlite and HCL (2nd Party “supplier”)
Delivery to be done within 2 months from date of contract.
Purchase order was issued to M/s Starlite.
Supply was not done within 2 months. Hence the Board sent letters to Starlite and HCL. The PO was cancelled as no supply was made.
Thereafter the Board debarred from all business dealings with the Board for 2 years including participation in tenders.
HCL filed a writ petition to quash office order dt. 29.8.2012 issued by the Secretary Bihar State Electricity Board whereby the Board debarred HCL for 2 years.
Contentions of the Petitioner : –
1. The Senior Officials of HCL visited office of the Board and took note of lack of coordination and communication by Starlite.
2. Requested for a new time schedule to deliver. Request for revoking the debarring orders was made.
3. Board without issuing any notice and without providing any opportunity of being heard debarred / blacklisted the petitioner.
4. No show cause notice in regard to blacklisting was issued to petitioner.
5. No statutory power of blacklisting available to the Board as per the Electricity (Suppy) Act, 1948 Blacklisting should be awarded in rare cases.
Contentions of Respondent : –
1. Show cause notice was not required as correspondence happened with petitioner by the Board.
2. Board gave two opportunities to deliver the material in seven days, still the petitioner could not deliver.
3. Petitioner stated that it will not supply, therefore plea of violation of natural justice on account of not issuing show cause notice is not tenable.
4. Petitioner admits breach of agreement on its part which is the basis of passing blacklisting order.
5. The Board shall be a body corporate by name notified under subsection (1) of Sec 5 of the Electricity (Supply) Act 1948. Hence a right to trade is recognised in the Board and the right of blacklisting is thus inherent power of the Board.
6. To prevent unethical practices like the unfulfillment of contract by the petitioner needs blacklisting.
7. Damage to the Board by the action of the petitioner is not quantifiable and thus punishment of blacklisting was essential.
Court’s observation : –
1. Impugned order of blacklisting has serious legal infirmities.
2. Impugned order of blacklisting is against the principles of natural justice. If show cause notice is not issued to the petitioner and a reasonable opportunity is not given to the petitioner to put its contentions before blacklisting, the entire order of blacklisting would be based upon subjective satisfaction of the concerned authority contrary to law laid down in (M/s Eruslan Equipment & Chemicals Ltd. v. State of West bengal and another AIR 1975 S.C. 266).
3. May be the petitioner and its dealer did not act in the manner as is expected of a party in a free and fair contract entered into between the parties as per terms and conditions of the contract but for a mere contractual violation it cannot be said that the only penalty can be blacklisting.
4. Under Article 14 of the Constitution of India a fundamental right has been conferred upon all persons which includes the privilege and advantage of entering into lawful relationship with the Govt. for the purpose of gains. In the absence of constitutional or statutory power if such an authority is “State” under Article 12 it would not be open to it to ordinarily blacklist any person dealing with it. Action of blacklisting to be taken in exceptional cases if it involves commission of corrupt practice or unfair practice or in cases of criminality of a grave nature.
5. The order of blacklisting was communicate by the Board to other electricity boards and power corporations. This is not right. The blacklisting order must be limited to that very organisation and it would not be open to and other Public Undertaking or the State Governments of the Central Government to act upon the basis of such blacklisting order passed by such organisation.
6. Order of blacklisting quashed, no costs.
Highlights : –
Blacklists are instruments of coercion.
The grounds on which blacklisting may be ordered are if the proprietor of the firm is convicted by Court of law or security considerations so warrant or if there is strong justification for believing that the proprietor or employee of the firm has been guilty of malpractices such as bribery, corruption, fraud, or if the firm continously refuses to return Govt dues or if the firm employs a Govt. servant, dismissed or removed on account of corruption in a position where he could corrupt Govt. servant.
Reputation is a part of person’s character and personality. Blacklisting tarnishes one’s reputation.Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist.
(M/s Eruslan Equipment & Chemicals Ltd. v. State of West bengal and another AIR 1975 S.C. 266)
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