Joseph Vilangandan Vs. The Executive
Engineer, Buildings & Roads (P.W.D.) Division  INSC 70 (20 March
SARKARIA, RANJIT SINGH SARKARIA, RANJIT SINGH
CITATION: 1978 AIR 930 1978 SCR (3) 514 1978
SCC (3) 36
Natural Justice-Black listing of a
contractor-Whether opportunity of being heard is necessary-Nature of
The appellant was a Government Contractor of
16 years standing. He has been executing major building contracts.
The Executive Engineer, PWD, Ernakulum,
invited tenders for executing certain repairs to English and Mathematics blocks
of Maharaja College at Ernakulum. The tender given by the appellant was
accepted, and a formal agreement was executed.
The agreement provided that the work should
be completed within a stipulated time and that the time shall be considered as
the essence of the contract.
The appellant alleged that in spite of his
requests the building was not handed over to him to enable him to start the
work, and that in the meantime, the Engineers' strike supervened in which
respondents 1 to 4 participated. The Executive Engineer sent a letter to the
appellant asking him to show cause why the work might not be arranged otherwise
at the appellant's risk and loss through other agencies after debarring the
appellant as a defaulter and making good the loss that might accrue to the
department from the subsisting contract in the division. The appellant sent a
reply to the show cause notice asserting that he committed no default. The
Executive Engineer finally cancelled the contract and informed the appellant;
that the work was being arranged at the appellant's risk and loss through other
agencies after declaring him a defaulter. The appellant was debarred from
taking any contracts in future from the Department in Ernakulum Division. The
appellant filed a writ petition under Art. 226 before the High Court. The
learned Single Judge dismissed the Writ Petition. An appeal filed to the
Division Bench also failed:
The appellant contended in, appeal by Special
Leave, that the order was illegal and void for the reasons that no opportunity
was given to the appellant to represent his case before passing the impugned
order. 'The respondent con- tended that the notice given to the appellant
requesting him to show cause why the work might not be got done through other
agencies after debarring him as a defaulter, afforded him sufficient
opportunity to represent his case.
Allowing the appeal the Court,
HELD (1) The majority judgment of the Kerala
High Court in the case of Thomas v. State of Kerala which holds that a person
is not entitled to a hearing before he is black- listed must be deemed to have
been over-ruled by this Court in the case of Erusian Equipment & Chemicals
Ltd. v. State of West Bengal, where it was held that fundamentals of fairplay
require that the person concerned should be given an opportunity to represent
his case before he is put on the black-list. The show cause notice given to the
appellant, if construed in the context of the entire para, could be understood
as conveying no more than that an action with reference to the contract in
question only, was under contemplation. 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. The
appellant was thus not afforded adequate opportunity to represent against the
impugned action which must, therefore, be held to be bad in law. [518 E-F, 519
A-B, D] Erusian Equipment & Chemicals Ltd. v. State of West Bengal  2
S.C.R. explained; Thomas v. State of Kerala I.L.R.
1968(2) Kerala 1(F.B.) overruled.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 2448 of 1968.
515 T. C. Raghavan, Sardar Bahadur Saharya
& Vishnu Bahadur Saharya for the appellant.
S. V. Gupte & K. M. K. Nair for the
The Judgment of the Court was delivered by
SARKARIA, J.-This appeal by special leave directed against a Division Bench
judgment of the Kerala High Court raises a question with regard to the validity
of an order dated June 20, 1968 whereby the Executive Engineer debarred the
appellant from taking any further contract under the Buildings & Roads
The appellant is a Government Contractor of
16 years standing. He has been executing major building contracts.
The, Executive Engneer, P.W.D. Ernakulam
(Respondent No. 1) invited tenders for ,executing certain repairs to the
English and Mathematics Blocks of the Maharaja College at Ernakulam. The
appellant submitted a tender, dated March 8, 1967, for doing this work. In
response to a letter from Respondent 1, the appellant sent his consent letter,
dated March 27, 1967 (Ex. p-1), agreeing to reduced rates of certain items of
the work, on the condition that "as soon as the Selection Notice is issued
the building should be got vacated to facilitate the starting of the
work". The tender was then accepted by the Executive Engineer and a
Selection Notice was issued to the appellant on March 31, 1967 in which it was,
inter alia, stated that the "facilities for carrying out the work will be
given as soon as you start the work".
A formal agreement was executed on April 26,
1967, by the appellant and the Executive Engineer. Condition No. 4 of the
agreement stipulated that "time shall be considered as the essence of the
agreement and the contractor hereby agrees to commence the work as soon as the
agreement is accepted by the competent authority (Executive Engineer) and the
site (or premises) is handed over to him (contractor) as provided for in the
conditions and to complete the work within 6 months from the date of such
handing over of the site (or premises)".
The appellant alleged that inspite of his
request, the Executive Engineer and his assistants (Respondents 2 to 4) took no
steps to hand over the building in order to enable him to start the work. the
repair work could commence only after the removal of the electric wirings, and
such removal wag not done up to July 10, 1967.
In the meantime, the Engineers' strike
supervened, in which Respondents 1 to 4 participated. The period of six months
for carrying out the work expired before the Engineers' strike came to an end.
On October 27, 1967, the appellant wrote a
letter to the 'Executive Engineer (Respondent 1), requesting for release from
the contract. He stated :
"Due to some unavoidable circumstances
the building has not been got vacated so far. The completion period 516 a per
the tender for the work, i.e., 6 months is over. Now the cost of materials and
labour have increased considerably. In the above circumstances I request that I
may kindly be released from the above agreement of work and the security may be
released." On April 17, 1.968, the Executive Engineer sent a Notice (Ex.
P-6) to the appellant, which reads as follows :
"The fulfilment of the undertaking given
by the department to give facilities to carry out the work as soon as you start
the work was not even necessitated as you have failed even to commence the work
as per the terms of the contract....
You are, therefore, requested to show cause
within seven days from the date of this notice why the work may not be arranged
otherwise at your risk and loss, through other agencies after- debarring you as
a defaulter and making good the loss that may accrue to the department, from
your subsisting contracts in this Division." (Emphasis supplied) The
appellant, on May 20, 1968, sent a reply asserting that he committed no
default; that he had collected the required wooden materials necessary for
starting the work, immediately after the execution of the agreement, and that
the delay in starting the work was only due to the delay in handing over the
building to him.
However, the Executive Engineer finally
communicated his order,. dated June 20, 1968 (Ex. P-8), canceling the contract
and informing the appellant that "the work is being arranged at your risk
and loss through other agencies after declaring you as a defaulter and
debarring you from taking further contract under the Division." (Emphasis
supplied) To challenge this order of the Executive Engineer, debarring the
appellant from 'taking further contract under the Division, a Writ Petition
(O.P. No. 2869 of 1968) under Article 226 of the Constitution was filed by the
appellant in the Kerala High Court. It was contended in the petition that the
said Order (Ex. P-8) of the Executive Engineer, was ultra vires, illegal and
unconstitutional as it violated the appellant's fundamental rights guaranteed
under Article 19(1)(f) and (g) of the Constitution. He further maintained that
Respondent I was not right in holding the appellant a defaulter; nor had he any
power or jurisdiction to 'black- list' or rebar the appellant from taking
further contracts in Ernakulam Division.
In the counter-affidavit filed on behalf of
Respondent 1, it was. stated :
(a) The Principal of the College when the
work had to 517 be carried out reported that the work may be done after the
monsoon was over.
(b) During the period of the Engineers'
strike from 11-8-67 to 5-10-67 also there was nothing on record to show that
the petitioner (Appellant) had approached either the Administrative Officer or
work Superintendent or instructions to start the work and as soon as "No
Work Programme" was over, the Assistant Engineer issued a notice by registered
post to the appellant on 9-10- 67, directing him to start the work on or before
13-10-67. The contractor did not take any steps to commence the work, but sent
a reply, dated 27-10-67, requesting that he be released from the contract.
(c) On November 22, 1967, the Principal of
the College, wrote that all arrangements to vacate the building had been made.
Respondent 1 thereupon sent one more notice by registered post to the
petitioner (appellant) on December 8, 1967, but the latter wilfully refused to
accept the same.
(d) It was wrong that the appellant had
collected any materials at the site to start the work.
(e) On April 20, 1968, a letter was received
from the appellant, claiming higher rates to execute the work. In the
alternative, he requested that his security might be released at an early date.
The appellant however admitted in this letter that the building in question was
made available to him for executing the work in October 1967. Respondent I
found the explanation of the appellant unsatisfactory.
After hearing the arguments, a learned single
Judge of the High Court (K.K. Mathew, J.-), dismissed the petition in these
words "In the light of the majority decision in I.L.R. 1968(2) Kerala Page
1, I dismiss the Writ Petition. No costs." Against this judgment, the
appellant preferred a Writ Appeal (No. 182 of 1968) before a Division Bench of
the High Court.
The Bench dismissed the appeal in limine.
Hence this appeal, by special leave.
Mr. Raghavan appearing for the appellant,
submits that apart from the competency of the Executive Engineer to 'black-
list' or debar the appellant from faking contracts with B & R Department in
Ernakulam Division, the impugned order was illegal and void for the reason that
no opportunity was given to the Appellant to represent his case before he was
put on the 'black list'. For this contention, 518 reliance has been placed on
the recent decision of this Court in Erusian Equipment & Chemicals Ltd. v.
State of West Bengal.(1) As against the above, the learned Attorney General has
drawn our attention to the fact that a notice, dated April 17, 1968 (Ex. P-6)
was given by the Executive Engineer to the appellant requesting the latter to
show cause why the work may not be got done through other agencies, at the
appellant's risk and loss; after debarring him as a defaulter. It is 'submitted
that this notice did indicate to the appellant that action to debar him from
doing further contract work under the department was contemplated, and as such,
this case is not hit by the ratio of Erusian Equipment's case (ibid). It is
further maintained that in Thomas v. State of Kerala,(2) it was rightly
observed that the law does not deny to the Government the freedom of con- tract
(carrying with it the freedom not to enter into a contract, it vouchsafes to
every person. Reference was also made to the observations of this Court in C.K.
Achuthan v. State of Kerala (3) in support of the contention that the impugned
order does not per se offend Articles 14 and 19 (a) (g) of the Constitution.
Those observations are to the effect : "There is no discrimination,
because it is perfectly open to the Government, even as it is to a private
party, to choose a person to their liking, to fulfill contracts which they wish
to be performed. When one person is chosen rather than another, the aggrieved
party cannot claim the protection of Article 14, because the choice of the-
person to fulfill a particular contract must be left to the Government.
(Because of the breach or, cancellation of his contract, the private person)
cannot complain that there has been a deprivation. of the right to practice any
profession or to carry on any occupation, trade or business, such as is
contemplated by Article 19(1)(g)." (Parenthesis, within brackets, added).
The majority judgment of the Kerala High
Court, inasmuch as it holds that a person is not entitled to a hearing, before:
he is blacklisted, must be deemed to have
been overruled by the decision of this Court in Erusian Equipment (ibid)
wherein it was held that "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." Controversy in the instant case, therefore,
narrows down into the issue, whether such an opportunity was given to the appellant.
Answer to this question will turn on an interpretation of the notice, dated
April 17, 1968 (Ex. P- 8) given by the Executive Engineer to the appellant.
This notice has been extracted in a foregoing part of this judgment. The
material sentence therein is: "You are, therefore, requested to show cause
.... why the work may not be arranged otherwise at your risk and loss, through
other 1 agencies after debarring you as a defaulter..............
The crucial words are those that have been
underlined. They take their color from the context. Construed along with the
links of the sentence which precede and succeed them, (1)  2 S.C.R.674.
(2) I L R (1968) 2 Kerala 1 (F.B.) (3) A.I.R.
1959 S.C. 490.
519 the words "debarring you as a
defaulter", could be understood as conveying no more than that an action
with reference to the contract in question, only was under contemplation. 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. A perusal of the appellant's reply (Ex. P-7), dated May
20, 1968, sent to the Executive Engineer, also appears to show that by the word
"debarring" mentioned in the Executive Engineer's letter dated April
17, 1968 (Ex. P-6), he understood as debarring him from executing the contract
in question after declaring him a defaulter, and then getting the same work
done by other agencies, at his risk and loss. All that has been said in Ex. P-7
by the appellant is directed to justify that the non-execution of the contract
was not due to his fault, but due to the delay on the part of the department in
handing over the building to him for starting the work within the time
specified in the agreement, and consequently, if any loss would be incurred by
the department in getting the work done through any other agency, he would not
be liable to make good the same. 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 any contract,
whatever, under the department or its Ernakulam Division was in contemplation.
The appellant was thus not afforded adequate
opportunity to represent against the impugned action.
This being the position, the rule in Erusian
Equipment's case (ibid) will be attracted with full force. While conceding that
the State can enter into contract with any person it chooses and no person has
a fundamental Tight to insist that the Government must enter a contract with
him, this Court observed (in the said case) "Blacklisting has the effect
of preventing a person from the privilege and advantage of entering into lawful
relationship with the Government for purposes of gains. The fact that a disability
is created by the order of blacklisting indicates that the relevant authority
is to have an objective satisfaction. Fundamentals of fair play require that
the person concerned should be given an opportunity to represent his case
before he is put on the black list." The above enunciation squarely covers
the case before us.
Accordingly, we allow this appeal, set aside
the judgment of the High Court and quash the impugned order. There will be no
order as to costs.