Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
%
Date of Decision: 25.10.2013
+ WP(C) No.6718 of 2013
M/S GORKHA SECURITY SERVICES ....PETITIONER
Through: Mr. K.K. Rai, Sr. Adv. With Mr.
Rarkeshwar Nath and Mr. Saurabh
Kumar Tuteja, Advs.
Versus
GOVT. OF NCT OF DELHI & ORS. ....RESPONDENTS
Through: Ms. Zubeda Begum, Standing Counsel
for Govt. of NCT of Delhi with Ms.
Sana Ansari., Adv.
CORAM:
HON'BLE MR. JUSTICE V.K.JAIN
JUDGMENT
V.K.JAIN, J. (Oral)
The petitioner before this Court was awarded a contract to
provide security services in Shri Dada Dev Matri Avum Shishu
Chiktsalaya, Dabri, New Delhi – 110045, for a period of one year with
effect from 2.9.2011 to 1.9.2012. The petitioner, however, continued to
provide services even thereafter. The case of the petitioner is that it has
not been paid for the security services provided by it in terms of the
aforesaid contract.
2. Vide notice dated 4.8.2012, the respondents, referring to their
earlier letter dated 17.10.2011, directed the petitioner to submit the valid
EPF/ESIC certificate, list of persons deployed, along with copies of
their educational certificates, police verification report and medical
examination report, etc and to make the payment of prescribed
W.P.(C) No.6718/2013 Page 1 of 13
minimum wages to the workers through ECS or by cheque and deposit
the ESI/PF and service tax etc. In the aforesaid notice, the respondents,
inter alia, observed as under:
(i) in spite of the lapse of a long period, the petitioner had
failed to submit the requisite document/ information;
(ii) neither the firm is making full payment or minimum
prescribed wages nor providing the statutory benefits like
EPF and ESI etc to the workmen/ security guards;
(iii) the petitioner has failed to provide the complete list of
workers deployed in the hospital and also appointing/
suspending/ transferring the personnel/ security guards
without any intimation to the hospital administration
thereby placing the security of the hospital at a higher risk
in the absence of the non-availability of credentials of the
deployed security guards;
(iv) the security guards were absent from their place of duty,
particularly during the nigh hours, though their presence
was shown on the attendance register and sometimes the
points fixed for the security check were left unattended;
(v) a number of complaints were received against the security
guards alleging demanding illegal gratification in the garb
of the tip/ baksheesh from the relatives of the patients, who
were then allowed to avail un-scheduled entry in the
hospital;
(vi) the petitioner has not complied with the Circular dated
21.4.2012 and notice dated 26.6.2012 directing it to make
payment through ECS from April-2012 and submit the
W.P.(C) No.6718/2013 Page 2 of 13
proof thereof and submit a list of workers deployed in the
hospital along with a copy of the registration of each
worker;
The petitioner, was, therefore, directed to explain within seven (7)
days as to why the action against it be not taken for failure to abide by
the terms and conditions and also for violating the labour laws etc.
3. Vide communication dated 7.8.2012, the petitioner informed the
respondents (a) that they had obtained EPF& ESIC numbers in respect
of deployed security personnel and deposited their contributions towards
EPF & ESIC with the concerned authorities and submitted photocopies
of consolidated challans with the bills and (b) they had made payment to
the workers as per the Minimum Wages Act and had also deposited the
contribution of EPF & ESIC;
4. The notice dated 04.08.2012 was replied by the petitioner on
17.8.2012 and along with its reply, the petitioner submitted; (a)
photocopies of bio-data in respect of deployed thirty two (32) security
personnel along with police verification report, (b) list of security
personnel along with their date of birth, educational qualification,
addresses and EPF & ESIC numbers. The petitioner also assured that in
case of any change/ transfer in future, the same would be informed and
that it had instructed all the security personnel not to accept any illegal
gratification and not to allow any un-scheduled entry in the hospital. As
regards payment through ESC/ Cheque, it was stated that they had
directed the personnel to open saving accounts and until such accounts
are opened, they had to disburse wages to the workers in cash.
W.P.(C) No.6718/2013 Page 3 of 13
5. Vide show-cause notice dated 6.2.2013, the respondents, inter
alia, noted as under:
(i) as per the terms and conditions of the agreement, it was
binding upon the petitioner to make the payment of
minimum wages through ECS as also to extend the other
benefits to the workers and to make timely payment to the
respective departments and submit proof in this regard;
(ii) the petitioner was required to maintain the day-to-day
deployment register of the security guards and get the same
countersigned as also to get the antecedents of the security
staff verified and submit the copies of the same along with
list of security personnel, which the petitioner had failed to
submit;
(iii) the petitioner had failed to properly manage and provide
satisfactory service;
(iv) the petitioner had failed to submit requisite documents in
terms of the letter dated 17.10.2011;
(v) the petitioner had failed to submit the documents such as
list of workers along with the proof of payment made to the
workers through ECS/ cheque, duly authenticated by the
concern bank, in respect of each worker along with labour
licence;
(vi) the petitioner had made the payment to the workers in cash
up to May-2012;
(vii) scrutiny of documents furnished by the petitioner revealed
that the list submitted by it including the names of some
employees who were actually not working in the hospital
W.P.(C) No.6718/2013 Page 4 of 13
and some employees were working in double duty, as
against the shift of eight (8) hours which was not allowed;
(viii) the petitioner failed to submit the list of workers along with
the requisite information in the prescribed performa
pertaining to deposit pertaining to the deposit of the ESI
contributions;
The petitioner was directed to show cause within seven(7) days as
to why action be not taken against it as deem fit by the Competent
Authority.
6. The show-cause notice was replied by the petitioner vide reply
dated 25.4.2013 stating therein that it was following the provisions of
the agreement as signed between the parties and it was maintaining the
register of the security guards which was duly counter-signed by the
representative of the hospital. It was further submitted in the said reply
that labour licence had already been provided to the hospital and the
petitioner had not engaged any workmen on double duty.
7. Vide impugned order dated 11.9.2013, the respondent imposed
the following penalties upon the petitioner:
(1) A penalty of Rs.3000/- (rupees three thousand only) under
clause 27© of the T&C, on account of public complaints.
(2) A penalty of Rs.41,826/- (Rupees Forty One Thousand Eight
Hundred Twenty Six Only) under Clause 27(C) a.(i) on
account of unsatisfactory performance and not abiding by the
statutory requirements.
(3) A penalty of forfeiture of performance guarantees amounting
to Rs.3,70,000/- (rupees three lac seventy thousand only).
W.P.(C) No.6718/2013 Page 5 of 13
(4) A penalty of blacklisting the firm M/s Gorkha Security for a
period of four (4) years from the date of this order, from
participating the tenders in any of the department of Delhi
Government/ Central Government/ Autonomous Body under
the Government.
8. The impugned order is assailed by the learned senior counsel for
the petitioner on the following grounds:
(i) the show-cause notice dated 6.2.2013 made no reference to
the proposed black-listing of the petitioner and, therefore
the petitioner had no opportunity to make a representation
in this regard;
(ii) no opportunity of personal hearing was given to the
petitioner before passing the impugned order; and
(iii) there was no ground for black-listing the petitioner since no
term of the agreement was breached by it.
9. As regards, the power of the State to blacklist a person, the
following view was taken by this Court in W.P(C) No.7369/2011 M/s
Sabharwal Medicos Pvt. Ltd. Through its Director versus Union of
India & Ors. [decided on 25.9.2013]:
“8. It is an undisputed legal proposition that the State has an
inherent right either to enter or not to enter in a contract with
any person though even in such matters, it is required to act
fairly, reasonably and without actuated by any mala fide. A
reference in this regard may be made to the following view
taken in Patel Engineering Limited Vs. Union of India and Anr.
(2012) 11 SCC 257:
W.P.(C) No.6718/2013 Page 6 of 13
“The State can decline to enter into a contractual
relationship with a person or a class of persons for a legitimate
purpose. The authority of State to blacklist a person is a
necessary concomitant to the executive power of the State to
carry on the trade or the business and making of contracts for
any purpose, etc. There need not be any statutory grant of such
power. The only legal limitation upon the exercise of such an
authority is that State is to act fairly and rationally without in
any way being arbitrary - thereby such a decision can be taken
for some legitimate purpose. What is the legitimate purpose that
is sought to be achieved by the State in a given case can vary
depending upon various factors.
As regards oral hearing the, the following was the view taken by
the Apex Court:
“Coming to the submission that R-2 ought to have given
an oral hearing before the impugned order was taken, we agree
with the conclusion of the High Court that there is no inviolable
rule that a personal hearing of the affected party must precede
every decision of the State. This Court in Union of India and
Anr. v. Jesus Sales Corporation, (1996) 4 SCC 69, held so even
in the context of a quasi-judicial decision. We cannot, therefore,
take a different opinion in the context of a commercial decision
of State.”
The following view taken by the Apex Court in Grosons
Pharmaceuticals (P) Ltd. & Anr. Vs. State of U.P. & Ors.
(2001) 8 SCC 604 is also relevant to the issue involved in these
writ petitions.
“2. Learned counsel appearing for the appellant, urged that
seeing the nature the seriousness of the order passed against the
appellant, the respondent ought to have supplied all the
materials on the basis of which the charges contained in the
show cause notice were based along with show cause notice and
in the absence of supply of materials, the order impugned is
against the principles of natural justice. We do not find any
merit in this contention. Admittedly, the appellant has only
contractual relationship with the State government and the said
W.P.(C) No.6718/2013 Page 7 of 13
relationship is not governed by any statutory Rules. There is no
statutory rule which requires that an approved contractor cannot
be blacklisted without giving an opportunity of show cause. It is
true that an order blacklisting an approved contractor results in
civil consequences and in such a situation in the absence of
statutory rules, the only requirement of law while passing such
an order was to observe the principle of audi alteram partem
which is one of the fact of the principles of natural justice. The
contention that it was incumbent upon the respondent to have
supplied the material on the basis of which the charges against
the appellant were based was not the requirement of principle of
audi alteram partem . It was sufficient requirement of law that
an opportunity of show cause was given to the appellant before
it was blacklisted.”
As regards, scope of interference by the court in such
administrative decisions, the following view was taken by this Court in
the aforesaid case:
15. In DDA & Anr. Vs. UEE Electricals Engg. (P) Ltd. &
Anr. (2004) 11 SCC 213, a three Judges Bench of the Apex
Court held that while considering the challenge to
administrative decision, the Courts will not interfere as if they
are sitting in appeal over the decision. The following view
taken by the Apex Court with respect to the relations between a
Company and its Directors are pertinent for the purpose of the
cases before this Court:
“17. Though in a legalistic sense an incorporated body like a
company and its Directors are separate entities for certain
purposes, in many companies they act as alter ego. For the acts
of the Director, the concept of vicarious and constructive
liabilities operates so far as the company is concerned. The acts
of the company are done primarily through the Directors or the
employees. In a case like the one at hand, the stand of
respondent No. 1 - Company that even if one of its Directors
has assaulted an employee of the appellant-Authority, yet it is
of no consequence when deciding the tender application. The
strained relationship between a contractor and the contractee
can have its implications in working out the contract.
W.P.(C) No.6718/2013 Page 8 of 13
18. This is not a case where the appellant-Authority can be said
to have acted in a mala fide manner or with oblique motives. If
the Authority felt that in view of the background fats, it would
be undesirable to accept the tender, the same is not open to
judicial review in the absence of any proved mala fide or
irrationality. The impugned judgment of the High Court is
indefensible and is set aside. The appeal is allowed. Costs made
easy.”
10. The following inter alia were the terms and conditions of the
contract, as contained in the NIT, which, in terms of clause (ii) of the
formal agreement dated 08.09.2011, formed part of the agreement
between the parties:-
“Terms and Conditions of the Contract:
1. The security personnel provided shall be the employees of the
contractor and all statutory liabilities will be paid by the
contractor such as ESI, PF, Workmen’s Compensation Act, etc.
The list of staff going to be deployed shall be made available to
the Department and if any change is required on part of the
Department fresh list of staff shall be made available by the
agency after each and every change.
2. The contractor shall abide by and comply with all the relevant
laws and statutory requirements covered under Labour Act,
Minimum Wages and (Contract Labour (Regulation & Abolition
Act 1970), EPF etc with regard to the Security personnel engaged
by him for works. It will be the responsibility of the contractor to
provide details of manpower deployed by him. In the Department
and to the Labour Department.
4. The antecedents of security staff deployed shall be got verified by
the contractor from local police authority and an undertaking in
this regard to be submitted to the department and department shall
ensure that the contractor complies with the provisions.
W.P.(C) No.6718/2013 Page 9 of 13
10. The security staff shall not accept any gratitude or reward in any
shape.
12.Under the terms of their employment agreement with the
contractor the Security staff shall not do any professional or other
work for reward or otherwise, either directly or indirectly, except
for and on behalf of the contractor.
23. The contractor shall abide by and comply with all the relevant
laws and statutory requirements covered under various laws such
as Labour Act, Minimum Wages Act, Contract Labour
(Regulation and Abolition) Act, EPF, ESI and various other Acts
as applicable from time to time with regards to the personnel
engaged by the contractor for the Department.
a. In case the contractor fails to commence/ execute the work as
stipulated in the agreement or unsatisfactorily performance or
does not meet the statutory requirements of the contract,
Department reserves the right to impose the penalty as detailed
below:-
(ii) After two weeks delay principal employer reserves the
right to cancel the contract and withhold the agreement and get
this job be carried out preferable from other contractor(s)
registered with DGR and then from open market or with other
agencies if DGR registered agencies are not in a position to
provide such contractor(s). The difference if any will be
recovered from the defaulter contractor and also shall be
blacklisted for a period of four (4) years from participating in
such type of tender and his earnest money/ security deposit may
also be forfeited, if so warranted.
54. The contractor will have to deposit the proof of depositing
employee’s contribution towards PF/ ESI etc of each employee in
every 3 months.
55. The contractor shall disburse the wages to its staff deployed in the
Department every month through Electronic Fund Transfer to the
Bank Account of the concerned employees. The proof of such
W.P.(C) No.6718/2013 Page 10 of 13
EFT shall be maintained and made available for the inspection
whenever required.”
11. It would thus be seen that the contract between the parties
specifically empowered the respondents to blacklist the petitioner firm.
Therefore, when the show-cause notice received by the petitioner
expressly mentioned of such action as may be deemed appropriate by the
Competent Authority, the petitioner could easily visualize that the action
proposed by the Competent Authority could include blacklisting of the
petitioner – firm. Considering the express terms of the contract between
the parties, it was not necessary for the respondent to specifically refer to
the proposed blacklisting in the show-cause notice issued to the
petitioner. The purpose of show-cause notice is primarily to enable the
noticee to meet the grounds on which an action is proposed against it
and such grounds were fully detailed in the show-cause notice issued to
the petitioner. In fact, even prior to issue of the show-cause notice, the
petitioner was aware of the issues between the parties through the notice
dated 04.08.2012. It would, therefore, be difficult to say that the
petitioner did not know what case it had to meet while responding to the
show-cause notice. In any case, the petitioner did respond to the show-
cause notice without claiming the ambiguity in the said notice and,
therefore, it is not open to it to assail the impugned order on the ground
that there was no specific reference to the proposed blacklisting of in the
said notice.
12. The learned senior counsel for the petitioner relies upon the
decision of this Court in W.P.(C) No. 669/2013, titled Thermo Blow
Engineers vs. Delhi Development Authority , decided on 31.05.2013. A
perusal of the above-referred decision would show that in that case,
W.P.(C) No.6718/2013 Page 11 of 13
there was no provision for debarring in the notice, whereby the
quotations were invited by the respondent-DDA, but despite that, the
petitioner was debarred from furthering tendering in DDA. The
communication issued to the petitioner in that case made no reference to
the proposed debarring/black-listing. It was in these circumstances that
this Court held that the communication sent by the DDA to the petitioner
cannot be interpreted to be a show-cause notice against the proposed
debarring/black-listing.
13. As regards personal hearing, as noted earlier, the Hon’ble
Supreme Court in Patel Engineering Limited (supra) has clearly held
that there is no inviolable rule that a personal hearing of the affected
party must precede every decision of the State. As stated in the Grosons
Pharmaceuticals (P) Ltd. & Anr.(supra), the State before passing the
order of black-listing/debarring, is required to observe the principle of
audi alteram partem and that requirement was duly complied with by
the respondents by issuing a detailed show-cause notice to the petitioner.
In any case, a perusal of the reply submitted by the petitioner to the
show cause notice would show that no personal hearing was sought by
the petitioner while responding to the said notice. In these
circumstances, it was not obligatory for the respondent to afford an
opportunity of oral hearing to the petitioner, of their own.
14. As regards, the last contention that there was no breach of the
terms of the contract, I find that the Competent Authority after taking
into consideration the reply submitted by the petitioner has come to the
conclusion that there were numerous breaches of the terms and
conditions of the agreement by the petitioner. On a perusal of the
response to the show-cause notice, I find that some of the grievances of
W.P.(C) No.6718/2013 Page 12 of 13
the respondents, as stated in the notice, were not even denied in the
reply. If the petitioner feels that the few findings recorded by the
respondents in the impugned order are factually incorrect, the
appropriate remedy for the petitioner would be to approach the civil
court in this regard since disputed questions of facts cannot be gone into
in a writ petition.
It is primarily for the competent authority to decide, after
considering the reply, if any, furnished by the noticee and taking into
consideration the facts and circumstances of the case as to whether there
was any breach of the terms of the contract on the part of the noticee or
not and whether the acts and omissions attributed to the noticee justify
blacklisting or not. The writ court cannot substitute its own view for the
view of the Competent Authority and cannot interfere with such a
decision unless it is shown that the decision so taken by the Competent
Authority was wholly arbitrary or perverse in nature. That, however,
cannot be said with respect to the conclusion drawn in the impugned
order.
15. For the reasons stated hereinabove, I find no merit in the petition
and the same is hereby dismissed. There shall be no orders as to costs.
rd
OCTOBER 25, 2013/ V.K. JAIN, J.
W.P.(C) No.6718/2013 Page 13 of 13
%
Date of Decision: 25.10.2013
+ WP(C) No.6718 of 2013
M/S GORKHA SECURITY SERVICES ....PETITIONER
Through: Mr. K.K. Rai, Sr. Adv. With Mr.
Rarkeshwar Nath and Mr. Saurabh
Kumar Tuteja, Advs.
Versus
GOVT. OF NCT OF DELHI & ORS. ....RESPONDENTS
Through: Ms. Zubeda Begum, Standing Counsel
for Govt. of NCT of Delhi with Ms.
Sana Ansari., Adv.
CORAM:
HON'BLE MR. JUSTICE V.K.JAIN
JUDGMENT
V.K.JAIN, J. (Oral)
The petitioner before this Court was awarded a contract to
provide security services in Shri Dada Dev Matri Avum Shishu
Chiktsalaya, Dabri, New Delhi – 110045, for a period of one year with
effect from 2.9.2011 to 1.9.2012. The petitioner, however, continued to
provide services even thereafter. The case of the petitioner is that it has
not been paid for the security services provided by it in terms of the
aforesaid contract.
2. Vide notice dated 4.8.2012, the respondents, referring to their
earlier letter dated 17.10.2011, directed the petitioner to submit the valid
EPF/ESIC certificate, list of persons deployed, along with copies of
their educational certificates, police verification report and medical
examination report, etc and to make the payment of prescribed
W.P.(C) No.6718/2013 Page 1 of 13
minimum wages to the workers through ECS or by cheque and deposit
the ESI/PF and service tax etc. In the aforesaid notice, the respondents,
inter alia, observed as under:
(i) in spite of the lapse of a long period, the petitioner had
failed to submit the requisite document/ information;
(ii) neither the firm is making full payment or minimum
prescribed wages nor providing the statutory benefits like
EPF and ESI etc to the workmen/ security guards;
(iii) the petitioner has failed to provide the complete list of
workers deployed in the hospital and also appointing/
suspending/ transferring the personnel/ security guards
without any intimation to the hospital administration
thereby placing the security of the hospital at a higher risk
in the absence of the non-availability of credentials of the
deployed security guards;
(iv) the security guards were absent from their place of duty,
particularly during the nigh hours, though their presence
was shown on the attendance register and sometimes the
points fixed for the security check were left unattended;
(v) a number of complaints were received against the security
guards alleging demanding illegal gratification in the garb
of the tip/ baksheesh from the relatives of the patients, who
were then allowed to avail un-scheduled entry in the
hospital;
(vi) the petitioner has not complied with the Circular dated
21.4.2012 and notice dated 26.6.2012 directing it to make
payment through ECS from April-2012 and submit the
W.P.(C) No.6718/2013 Page 2 of 13
proof thereof and submit a list of workers deployed in the
hospital along with a copy of the registration of each
worker;
The petitioner, was, therefore, directed to explain within seven (7)
days as to why the action against it be not taken for failure to abide by
the terms and conditions and also for violating the labour laws etc.
3. Vide communication dated 7.8.2012, the petitioner informed the
respondents (a) that they had obtained EPF& ESIC numbers in respect
of deployed security personnel and deposited their contributions towards
EPF & ESIC with the concerned authorities and submitted photocopies
of consolidated challans with the bills and (b) they had made payment to
the workers as per the Minimum Wages Act and had also deposited the
contribution of EPF & ESIC;
4. The notice dated 04.08.2012 was replied by the petitioner on
17.8.2012 and along with its reply, the petitioner submitted; (a)
photocopies of bio-data in respect of deployed thirty two (32) security
personnel along with police verification report, (b) list of security
personnel along with their date of birth, educational qualification,
addresses and EPF & ESIC numbers. The petitioner also assured that in
case of any change/ transfer in future, the same would be informed and
that it had instructed all the security personnel not to accept any illegal
gratification and not to allow any un-scheduled entry in the hospital. As
regards payment through ESC/ Cheque, it was stated that they had
directed the personnel to open saving accounts and until such accounts
are opened, they had to disburse wages to the workers in cash.
W.P.(C) No.6718/2013 Page 3 of 13
5. Vide show-cause notice dated 6.2.2013, the respondents, inter
alia, noted as under:
(i) as per the terms and conditions of the agreement, it was
binding upon the petitioner to make the payment of
minimum wages through ECS as also to extend the other
benefits to the workers and to make timely payment to the
respective departments and submit proof in this regard;
(ii) the petitioner was required to maintain the day-to-day
deployment register of the security guards and get the same
countersigned as also to get the antecedents of the security
staff verified and submit the copies of the same along with
list of security personnel, which the petitioner had failed to
submit;
(iii) the petitioner had failed to properly manage and provide
satisfactory service;
(iv) the petitioner had failed to submit requisite documents in
terms of the letter dated 17.10.2011;
(v) the petitioner had failed to submit the documents such as
list of workers along with the proof of payment made to the
workers through ECS/ cheque, duly authenticated by the
concern bank, in respect of each worker along with labour
licence;
(vi) the petitioner had made the payment to the workers in cash
up to May-2012;
(vii) scrutiny of documents furnished by the petitioner revealed
that the list submitted by it including the names of some
employees who were actually not working in the hospital
W.P.(C) No.6718/2013 Page 4 of 13
and some employees were working in double duty, as
against the shift of eight (8) hours which was not allowed;
(viii) the petitioner failed to submit the list of workers along with
the requisite information in the prescribed performa
pertaining to deposit pertaining to the deposit of the ESI
contributions;
The petitioner was directed to show cause within seven(7) days as
to why action be not taken against it as deem fit by the Competent
Authority.
6. The show-cause notice was replied by the petitioner vide reply
dated 25.4.2013 stating therein that it was following the provisions of
the agreement as signed between the parties and it was maintaining the
register of the security guards which was duly counter-signed by the
representative of the hospital. It was further submitted in the said reply
that labour licence had already been provided to the hospital and the
petitioner had not engaged any workmen on double duty.
7. Vide impugned order dated 11.9.2013, the respondent imposed
the following penalties upon the petitioner:
(1) A penalty of Rs.3000/- (rupees three thousand only) under
clause 27© of the T&C, on account of public complaints.
(2) A penalty of Rs.41,826/- (Rupees Forty One Thousand Eight
Hundred Twenty Six Only) under Clause 27(C) a.(i) on
account of unsatisfactory performance and not abiding by the
statutory requirements.
(3) A penalty of forfeiture of performance guarantees amounting
to Rs.3,70,000/- (rupees three lac seventy thousand only).
W.P.(C) No.6718/2013 Page 5 of 13
(4) A penalty of blacklisting the firm M/s Gorkha Security for a
period of four (4) years from the date of this order, from
participating the tenders in any of the department of Delhi
Government/ Central Government/ Autonomous Body under
the Government.
8. The impugned order is assailed by the learned senior counsel for
the petitioner on the following grounds:
(i) the show-cause notice dated 6.2.2013 made no reference to
the proposed black-listing of the petitioner and, therefore
the petitioner had no opportunity to make a representation
in this regard;
(ii) no opportunity of personal hearing was given to the
petitioner before passing the impugned order; and
(iii) there was no ground for black-listing the petitioner since no
term of the agreement was breached by it.
9. As regards, the power of the State to blacklist a person, the
following view was taken by this Court in W.P(C) No.7369/2011 M/s
Sabharwal Medicos Pvt. Ltd. Through its Director versus Union of
India & Ors. [decided on 25.9.2013]:
“8. It is an undisputed legal proposition that the State has an
inherent right either to enter or not to enter in a contract with
any person though even in such matters, it is required to act
fairly, reasonably and without actuated by any mala fide. A
reference in this regard may be made to the following view
taken in Patel Engineering Limited Vs. Union of India and Anr.
(2012) 11 SCC 257:
W.P.(C) No.6718/2013 Page 6 of 13
“The State can decline to enter into a contractual
relationship with a person or a class of persons for a legitimate
purpose. The authority of State to blacklist a person is a
necessary concomitant to the executive power of the State to
carry on the trade or the business and making of contracts for
any purpose, etc. There need not be any statutory grant of such
power. The only legal limitation upon the exercise of such an
authority is that State is to act fairly and rationally without in
any way being arbitrary - thereby such a decision can be taken
for some legitimate purpose. What is the legitimate purpose that
is sought to be achieved by the State in a given case can vary
depending upon various factors.
As regards oral hearing the, the following was the view taken by
the Apex Court:
“Coming to the submission that R-2 ought to have given
an oral hearing before the impugned order was taken, we agree
with the conclusion of the High Court that there is no inviolable
rule that a personal hearing of the affected party must precede
every decision of the State. This Court in Union of India and
Anr. v. Jesus Sales Corporation, (1996) 4 SCC 69, held so even
in the context of a quasi-judicial decision. We cannot, therefore,
take a different opinion in the context of a commercial decision
of State.”
The following view taken by the Apex Court in Grosons
Pharmaceuticals (P) Ltd. & Anr. Vs. State of U.P. & Ors.
(2001) 8 SCC 604 is also relevant to the issue involved in these
writ petitions.
“2. Learned counsel appearing for the appellant, urged that
seeing the nature the seriousness of the order passed against the
appellant, the respondent ought to have supplied all the
materials on the basis of which the charges contained in the
show cause notice were based along with show cause notice and
in the absence of supply of materials, the order impugned is
against the principles of natural justice. We do not find any
merit in this contention. Admittedly, the appellant has only
contractual relationship with the State government and the said
W.P.(C) No.6718/2013 Page 7 of 13
relationship is not governed by any statutory Rules. There is no
statutory rule which requires that an approved contractor cannot
be blacklisted without giving an opportunity of show cause. It is
true that an order blacklisting an approved contractor results in
civil consequences and in such a situation in the absence of
statutory rules, the only requirement of law while passing such
an order was to observe the principle of audi alteram partem
which is one of the fact of the principles of natural justice. The
contention that it was incumbent upon the respondent to have
supplied the material on the basis of which the charges against
the appellant were based was not the requirement of principle of
audi alteram partem . It was sufficient requirement of law that
an opportunity of show cause was given to the appellant before
it was blacklisted.”
As regards, scope of interference by the court in such
administrative decisions, the following view was taken by this Court in
the aforesaid case:
15. In DDA & Anr. Vs. UEE Electricals Engg. (P) Ltd. &
Anr. (2004) 11 SCC 213, a three Judges Bench of the Apex
Court held that while considering the challenge to
administrative decision, the Courts will not interfere as if they
are sitting in appeal over the decision. The following view
taken by the Apex Court with respect to the relations between a
Company and its Directors are pertinent for the purpose of the
cases before this Court:
“17. Though in a legalistic sense an incorporated body like a
company and its Directors are separate entities for certain
purposes, in many companies they act as alter ego. For the acts
of the Director, the concept of vicarious and constructive
liabilities operates so far as the company is concerned. The acts
of the company are done primarily through the Directors or the
employees. In a case like the one at hand, the stand of
respondent No. 1 - Company that even if one of its Directors
has assaulted an employee of the appellant-Authority, yet it is
of no consequence when deciding the tender application. The
strained relationship between a contractor and the contractee
can have its implications in working out the contract.
W.P.(C) No.6718/2013 Page 8 of 13
18. This is not a case where the appellant-Authority can be said
to have acted in a mala fide manner or with oblique motives. If
the Authority felt that in view of the background fats, it would
be undesirable to accept the tender, the same is not open to
judicial review in the absence of any proved mala fide or
irrationality. The impugned judgment of the High Court is
indefensible and is set aside. The appeal is allowed. Costs made
easy.”
10. The following inter alia were the terms and conditions of the
contract, as contained in the NIT, which, in terms of clause (ii) of the
formal agreement dated 08.09.2011, formed part of the agreement
between the parties:-
“Terms and Conditions of the Contract:
1. The security personnel provided shall be the employees of the
contractor and all statutory liabilities will be paid by the
contractor such as ESI, PF, Workmen’s Compensation Act, etc.
The list of staff going to be deployed shall be made available to
the Department and if any change is required on part of the
Department fresh list of staff shall be made available by the
agency after each and every change.
2. The contractor shall abide by and comply with all the relevant
laws and statutory requirements covered under Labour Act,
Minimum Wages and (Contract Labour (Regulation & Abolition
Act 1970), EPF etc with regard to the Security personnel engaged
by him for works. It will be the responsibility of the contractor to
provide details of manpower deployed by him. In the Department
and to the Labour Department.
4. The antecedents of security staff deployed shall be got verified by
the contractor from local police authority and an undertaking in
this regard to be submitted to the department and department shall
ensure that the contractor complies with the provisions.
W.P.(C) No.6718/2013 Page 9 of 13
10. The security staff shall not accept any gratitude or reward in any
shape.
12.Under the terms of their employment agreement with the
contractor the Security staff shall not do any professional or other
work for reward or otherwise, either directly or indirectly, except
for and on behalf of the contractor.
23. The contractor shall abide by and comply with all the relevant
laws and statutory requirements covered under various laws such
as Labour Act, Minimum Wages Act, Contract Labour
(Regulation and Abolition) Act, EPF, ESI and various other Acts
as applicable from time to time with regards to the personnel
engaged by the contractor for the Department.
a. In case the contractor fails to commence/ execute the work as
stipulated in the agreement or unsatisfactorily performance or
does not meet the statutory requirements of the contract,
Department reserves the right to impose the penalty as detailed
below:-
(ii) After two weeks delay principal employer reserves the
right to cancel the contract and withhold the agreement and get
this job be carried out preferable from other contractor(s)
registered with DGR and then from open market or with other
agencies if DGR registered agencies are not in a position to
provide such contractor(s). The difference if any will be
recovered from the defaulter contractor and also shall be
blacklisted for a period of four (4) years from participating in
such type of tender and his earnest money/ security deposit may
also be forfeited, if so warranted.
54. The contractor will have to deposit the proof of depositing
employee’s contribution towards PF/ ESI etc of each employee in
every 3 months.
55. The contractor shall disburse the wages to its staff deployed in the
Department every month through Electronic Fund Transfer to the
Bank Account of the concerned employees. The proof of such
W.P.(C) No.6718/2013 Page 10 of 13
EFT shall be maintained and made available for the inspection
whenever required.”
11. It would thus be seen that the contract between the parties
specifically empowered the respondents to blacklist the petitioner firm.
Therefore, when the show-cause notice received by the petitioner
expressly mentioned of such action as may be deemed appropriate by the
Competent Authority, the petitioner could easily visualize that the action
proposed by the Competent Authority could include blacklisting of the
petitioner – firm. Considering the express terms of the contract between
the parties, it was not necessary for the respondent to specifically refer to
the proposed blacklisting in the show-cause notice issued to the
petitioner. The purpose of show-cause notice is primarily to enable the
noticee to meet the grounds on which an action is proposed against it
and such grounds were fully detailed in the show-cause notice issued to
the petitioner. In fact, even prior to issue of the show-cause notice, the
petitioner was aware of the issues between the parties through the notice
dated 04.08.2012. It would, therefore, be difficult to say that the
petitioner did not know what case it had to meet while responding to the
show-cause notice. In any case, the petitioner did respond to the show-
cause notice without claiming the ambiguity in the said notice and,
therefore, it is not open to it to assail the impugned order on the ground
that there was no specific reference to the proposed blacklisting of in the
said notice.
12. The learned senior counsel for the petitioner relies upon the
decision of this Court in W.P.(C) No. 669/2013, titled Thermo Blow
Engineers vs. Delhi Development Authority , decided on 31.05.2013. A
perusal of the above-referred decision would show that in that case,
W.P.(C) No.6718/2013 Page 11 of 13
there was no provision for debarring in the notice, whereby the
quotations were invited by the respondent-DDA, but despite that, the
petitioner was debarred from furthering tendering in DDA. The
communication issued to the petitioner in that case made no reference to
the proposed debarring/black-listing. It was in these circumstances that
this Court held that the communication sent by the DDA to the petitioner
cannot be interpreted to be a show-cause notice against the proposed
debarring/black-listing.
13. As regards personal hearing, as noted earlier, the Hon’ble
Supreme Court in Patel Engineering Limited (supra) has clearly held
that there is no inviolable rule that a personal hearing of the affected
party must precede every decision of the State. As stated in the Grosons
Pharmaceuticals (P) Ltd. & Anr.(supra), the State before passing the
order of black-listing/debarring, is required to observe the principle of
audi alteram partem and that requirement was duly complied with by
the respondents by issuing a detailed show-cause notice to the petitioner.
In any case, a perusal of the reply submitted by the petitioner to the
show cause notice would show that no personal hearing was sought by
the petitioner while responding to the said notice. In these
circumstances, it was not obligatory for the respondent to afford an
opportunity of oral hearing to the petitioner, of their own.
14. As regards, the last contention that there was no breach of the
terms of the contract, I find that the Competent Authority after taking
into consideration the reply submitted by the petitioner has come to the
conclusion that there were numerous breaches of the terms and
conditions of the agreement by the petitioner. On a perusal of the
response to the show-cause notice, I find that some of the grievances of
W.P.(C) No.6718/2013 Page 12 of 13
the respondents, as stated in the notice, were not even denied in the
reply. If the petitioner feels that the few findings recorded by the
respondents in the impugned order are factually incorrect, the
appropriate remedy for the petitioner would be to approach the civil
court in this regard since disputed questions of facts cannot be gone into
in a writ petition.
It is primarily for the competent authority to decide, after
considering the reply, if any, furnished by the noticee and taking into
consideration the facts and circumstances of the case as to whether there
was any breach of the terms of the contract on the part of the noticee or
not and whether the acts and omissions attributed to the noticee justify
blacklisting or not. The writ court cannot substitute its own view for the
view of the Competent Authority and cannot interfere with such a
decision unless it is shown that the decision so taken by the Competent
Authority was wholly arbitrary or perverse in nature. That, however,
cannot be said with respect to the conclusion drawn in the impugned
order.
15. For the reasons stated hereinabove, I find no merit in the petition
and the same is hereby dismissed. There shall be no orders as to costs.
rd
OCTOBER 25, 2013/ V.K. JAIN, J.
W.P.(C) No.6718/2013 Page 13 of 13