Southern
Painters Vs. Fertilizers & Chemicals Travancore Ltd. [1993] INSC 349 (10 September 1993)
Venkatachalliah,
M.N.(Cj) Venkatachalliah, M.N.(Cj) Anand, A.S. (J)
CITATION:
1994 AIR 1277 1994 SCC Supl. (2) 699
ACT:
HEAD NOTE:
ORDER
1.
Petitioner seeks special leave to appeal to this Court from the order dated 17-2-1993 of the Kerala High Court dismissing the petitioner's
Writ Appeal No. 280 of 1993.
Special
leave granted.
2.
Appellant is stated to be a firm of partners carrying on business as painting
contractors. The appellant was on the list of eight qualified painting
contractors on the panel prepared by the respondent-Public Sector Undertaking.
Appellant's
name was stated to be deleted from the list of qualified contractors on account
of what is stated to be a Vigilance Report. Consequently, the respondent did
not issue the tender form for the work of 'Anti-Corrosive Coating of the Prilling Tower' of urea plant in its factory to the appellant.
3.
Before its name was deleted from the list of qualified contractors, appellant
was not notified of the reason for the deletion. The tender forms were issued
to the remaining seven contractors, out of whom only two submitted their
quotations and one of them was issued the work order on 6-1- 1993. The appellant
aggrieved by the discriminatory treatment filed a writ petition in the High
Court of Kerala.
The
petition was filed on 19-1-1993. The learned Single Judge of the
High Court has dismissed the writ petition.
The
Division Bench dismissed the appellant's appeal, and observed:
"Admittedly,
following the procedure laid down in paras 5.1.1 and 5.1.2 in regard to pre-
qualification (as set out in the counter- affidavit of the first respondent)
the appellant's name was included in the list of contractors. Initially it was
included in a list of 12 contractors as provided in the said rules and
subsequently the appellant's name was included in another list of 8 contractors
consequent to the approval thereof by the Executive Director (Operation). The
tender forms were issued oh 1-6-1992 to the
other seven parties, but not to the appellant.
A
reading of the counter-affidavit and the reply-affidavit will disclose that
there was
enough
relevant material before the FACT for
taking
a decision not to issue any tender form to the appellant, including the
material relating to the inflated measurements given by the appellant in
relation to one of the previous contracts."
4. We
have heard Shri Sivasubramanium, learned Senior Counsel for the appellant and Shri
P.S. Poti, learned Senior Counsel for the respondent. The deletion of the name
of the appellant from the list of qualified contractors, says Shri Sivasubramanium,
in effect, amounts to blacklisting, and that it is now 701 settled law that
before a person's reputation could be so affected, he is entitled to have an
opportunity of being heard. We think that Shri Sivasubramanium is right in his
submission.
5. The
Full Bench decision in V. Punnen Thomas v. State of Kerala1 presents an interesting stage in
the development of law on the matter. The facts were somewhat similar. The
majority opinion in that case held:
"Surely,
the term, 'civil consequences' means something more than consequences which the
person concerned does not like. There must be at least the possibility of an
invasion of some civil right of his before it can be said that anything done in
respect of him has civil consequences. A mere refusal to afford a man the
prospect of doing profitable or unprofitable business with the Government, of
entering into advantageous relationships with the Government as it has been put
entails no civil consequences however serious a blow that might be to the
person concerned.
It is
said that the impugned order casts a stigma on the petitioner. Assuming that it
does, does that by itself attract the principle of natural justice? We think
not.
The
question whether an impugned act involves a stigma or not is relevant only for
the purpose of determining whether the act sounds only in the region of
contract or involves a punishment attracting the rules of natural justice....
To
accept the contention of the petitioner would so widen the scope of the
principle of audi alteram pattern and therefore the scope for judicial
interference as to seriously hamper the administration. It would mean, for
example, that before Government refuses to deal with a person.... it would have
to give the person concerned a hearing." (pp. 84-85)
6.
However, in his dissenting opinion, Justice Mathew (as he then was) said:
"Government
has right like any private citizen to enter into contracts with any person it
chooses and no person has a right fundamental or otherwise to insist that
Government must enter into a contractual relation with him.
A
contractual relationship presupposes a consensus of two minds. If Government is
not willing to enter into contract with a person, I do not think that
Government can be forced to do so. It is one thing to say that Government, like
any other private citizen can enter into contract with any person it pleases,
but a totally different thing to say that Government can unreasonably put a
person's name in a blacklist and debar him from entering into any contractual
relationship with the Government for years to come. In the former case, it
might be said that Government is exercising its right like any other private
citizen, but no democratic government should with impunity passing proceeding
which will have civil consequences to a citizen without notice and an
opportunity of being heard. The reason why the proceeding for blacklisting the
petitioner and debarring him from taking Government work for ten years was
passed, is that he committed irregularities in connection with the tender of
the contract work.
An ex parte
adverse adjudication that the petitioner committed irregularities in connection
with the tender for working down timber from 1 AIR 1969 Ker 81 : 1968 Ker LT
800: 1968 Ker LJ 619 702 Udumbandhola Block No. 1 by Government on the report
of some petty officer without notice and an opportunity of being heard to the petitioner
and putting his name in the blacklist and debarring him from 'taking any
Government work for ten years' by way of punishment, appear to me, to be
against all notions of fairness in a democratic country." (pp. 86-87)
7.
Justice Mathew held that "Reputation can be viewed both as an interest of
personality and as an interest of substance, viz., as an asset" and
recalled these words of Roscoe Pound:
"On
the one hand there is the claim of the individual to be secured in his dignity
and honour as part of his personality in a world in which one must live in
society among his fellow-men. On the other hand there is the claim to be
secured in his reputation as a part of his substance in that in a world in
which credit plays so large a part the confidence and esteem of one's
fellow-men may be a valuable asset." (See: Interest of Personality' 28
Harvard Law Review, pp. 445, 447).
Concluding,
Justice Mathew observed:
"As
the memorandum in question casts a stigma on the reputation of the petitioner,
which is both an interest of personality and an interest of substance, and as
it is attended with civil consequences to the petitioner, and as it operates as
a punishment for an alleged irregularity, I think, the memorandum should have
been proceeded by notice and an opportunity of being heard. If anybody were to
say that Ext. P-1 is an administrative proceeding and so no notice or
opportunity of being heard was required and that no interference under Article
226 is possible, I would answer him in the high and powerful words of Mr Belloc,
'you have mistaken the hour of the night: it is already morning'." (p. 89)
8. The
minority view of Justice Mathew is now the law. The majority view in V. Punnen
Thomas case1 is not good law and must be considered to have been, impliedly,
overruled by the Erusian case2. Indeed, in Joseph Vilangandan v. Executive
Engineer, Buildings & Roads (PWD) Division, Ernakulam3 it was held:
"
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
Equipment2......
9. In Erusian
Equipment & Chemicals Ltd. v. State of W.B.2 this Court observed: (SCC p. 75, paras 17, 18 & 20) "The State
need not enter into any contract with any one but if it does so, it must do so
fairly without discrimination and without unfair procedure. Reputation is a
part of a person's character and personality.
Blacklisting
tarnishes one's reputation.
Exclusion
of a member of the public from dealing with a State in sales transactions has
the effect of preventing him from purchasing and doing a lawful trade in the
goods in discriminating against him in favour of other people.
Erusian
Equipment & Chemicals Ltd. v. State of W.B,
(1975) 1 SCC 70, 75 3 (1978) 3 SCC 36, 41 : (1978) 3 SCR 514.
518
703 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."
10.
Again, in Raghunath Thakur v. State of Bihar4 this Court observed: (SCC p. 230, para 4) "Indisputably, no notice
had been given to the appellant of the proposal of blacklisting the appellant.
It was contended on behalf of the State Government that there was no
requirement in the rule of giving any prior notice before blacklisting any
person. Insofar as the contention that there is no requirement specifically of
giving any notice is concerned, the respondent is right. But it is an implied
principle of the rule of law that any order having civil consequence should be
passed only after following the principles of natural justice. It has to be realised
that blacklisting any person in respect of business ventures has civil
consequence for the future business of the person concerned in any event.
Even
if the rules do not express so, it is an elementary principle of natural
justice that parties affected by any order should have right of being heard and
making representations against the order."
11.
The deletion of the appellant's name from the list of approved contractors on
the ground that there were some vigilance report against it, could only be done
consistent with and after due compliance with the principles of natural
justice. That not having been done, it requires to be held that withholding of
the tender form from the appellant was not justified. In our opinion, the High
Court was not justified in dismissing the writ petition.
12.
However, on the question as to what is the effective relief grantable to the
appellant, the case presents its own difficulties. The work order was issued to
the other tenderer on 6-1-1993. According to the respondent and
that is not disputed the work has reached almost the stage of completion and
would be completed in a couple of months. It is not possible to retrace the
steps, nullify the contract awarded to the successful tenderer and efface the
work already done. It is unfortunate that the appellant has been denied this
opportunity to compete: but all that can now be done is to direct the continuance
of the appellant's name in the list of qualified contractors. If the
respondents want to have the appellant's name deleted, that could be done only
consistent with the principles of natural justice.
Till
that is done, the appellant shall continue to be entitled to be issued the
tender forms to compete with other qualified contractors. The appeal is
disposed of accordingly. There will be no order as to costs.
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