# M/s NSOFT(IND.) Services Pvt. Ltd v. Purvanchal Vidyut Vitaran Nigam Ltd. & Anr

- **Citation:** (2022) 10 ILRA 454
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022-09-02
- **Case number:** Writ-C No. 18052 of 2022
- **Bench:** Manoj Kumar Gupta, Dr. Yogendra Kumar Srivastava
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-nsoft-ind-services-pvt-ltd-v-purvanchal-vidyut-vitaran-nigam-ltd-anr-47746
- **Pages:** 13

## Headnote

A. Constitution of India - Article 226 -
Writ - Judicial review - Show cause notice
- Maintainability of writ against it - Held,
ordinarily a writ court may not exercise its
discretionary jurisdiction in entertaining a
writ petition questioning a notice to show
cause unless it is without jurisdiction;
however, when a notice is issued with
premeditation, writ petition would be
maintainable. (Para 15)
B. Civil law - Public contract - Blacklisting
of the contractor - No opportunity of
hearing - Held, the order of blacklisting
involves civil consequences and has the
effect
of
creating
a
disability
by
preventing a person from the privilege and
advantage
of
entering
into
lawful
relationship with the government - A fair
hearing
to
the
party
before
being
blacklisted thus becomes an essential precondition for a proper exercise of the
power - The applicability of the principle
of audi alteram partem and the necessity
of issuance of show cause notice also
becomes imperative before passing of any
such order of blacklisting - However, High
Court held the challenge to the show
cause notices premature for the reason
that the mere indication of the grounds
and the penalty proposed, would not give
rise to a cause of action - High Court
refused to exercise the extraordinary
jurisdiction under Article 226 of the
Constitution of India to interfere in the
matter, leaving it open to the petitioners
to submit their response to the show
cause notices. (Para 30, 39, 41 and 42)
C. Constitution of India - Article 14 -
Principle of natural justice - Principle of
10 All. M/s NSOFT(IND.) Services Pvt. Ltd. Vs. Purvanchal Vidyut Vitaran Nigam Ltd. & Anr. 455
audi alteram partem - The principle of
audi alteram partem has been held to be a
sina qua non and a basic tenet underlying
the principles of natural justice. (Para 33)
Writ petition disposed of. (E-1)
List of Cases cited:-

## Text

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454 INDIAN LAW REPORTS ALLAHABAD SERIES
Gwalior Act, Pujari had been given the
right to manage the property of the temple,
it is clear that that does not elevate him to
the status of Kashtkar Mourushi (tenant in
cultivation)."

13. For all the reasons aforesaid, we do
not find any merit in this writ petition.
Consequently, the writ petition is dismissed.

14. After this judgment was dictated in
open court, learned counsel or the petitioner
states that the petitioner may be permitted to
withdraw this writ petition.

15. We are not inclined to accept the
request of learned counsel for the petitioner
inasmuch as we have heard at length the writ
petition on merit and dictated judgment in
open court. After the judgment has been
dictated, the request of the petitioner to
withdraw the writ petition cannot be
accepted. Hence, the request is rejected.

16. Learned Chief Standing Counsel
shall intimate this order in writing to the
respondent Nos.2 and 3 within ten days, who
shall take all steps to protect the aforesaid
property of the Deity being Khasra Plot
No.502.
----------
(2022) 10 ILRA 454
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 02.09.2022

BEFORE

THE HON'BLE MANOJ KUMAR GUPTA, J.
THE HON'BLE DR. YOGENDRA KUMAR
SRIVASTAVA, J.

Writ-C No. 18052 of 2022
connected with Writ -C No. 18053 of 2022

M/s NSOFT(IND.) Services Pvt. Ltd.
 ...Petitioner
Versus
Purvanchal Vidyut Vitaran Nigam Ltd. &
Anr. ...Respondents

Counsel for the Petitioner:
Sri Ujjawal Satsangi, Sri Shagun K. Saran, Sri
Kartikey Dubey, Sri Prashant Chandra (Sr. Adv.)

Counsel for the Respondents:
Udit Chandra

A. Constitution of India - Article 226 -
Writ - Judicial review - Show cause notice
- Maintainability of writ against it - Held,
ordinarily a writ court may not exercise its
discretionary jurisdiction in entertaining a
writ petition questioning a notice to show
cause unless it is without jurisdiction;
however, when a notice is issued with
premeditation, writ petition would be
maintainable. (Para 15)
B. Civil law - Public contract - Blacklisting
of the contractor - No opportunity of
hearing - Held, the order of blacklisting
involves civil consequences and has the
effect
of
creating
a
disability
by
preventing a person from the privilege and
advantage
of
entering
into
lawful
relationship with the government - A fair
hearing
to
the
party
before
being
blacklisted thus becomes an essential precondition for a proper exercise of the
power - The applicability of the principle
of audi alteram partem and the necessity
of issuance of show cause notice also
becomes imperative before passing of any
such order of blacklisting - However, High
Court held the challenge to the show
cause notices premature for the reason
that the mere indication of the grounds
and the penalty proposed, would not give
rise to a cause of action - High Court
refused to exercise the extraordinary
jurisdiction under Article 226 of the
Constitution of India to interfere in the
matter, leaving it open to the petitioners
to submit their response to the show
cause notices. (Para 30, 39, 41 and 42)
C. Constitution of India - Article 14 -
Principle of natural justice - Principle of
10 All. M/s NSOFT(IND.) Services Pvt. Ltd. Vs. Purvanchal Vidyut Vitaran Nigam Ltd. & Anr. 455
audi alteram partem - The principle of
audi alteram partem has been held to be a
sina qua non and a basic tenet underlying
the principles of natural justice. (Para 33)
Writ petition disposed of. (E-1)
List of Cases cited:-
1. Siemens Ltd. Vs St. of Mah. & ors.; (2006) 12
SCC 33
2. Oryx Fisheries Pvt. Ltd Vs U.O.I. & ors.;
(2010) 13 SCC 427
3. Gorkha Security Services Vs Government
(NCT of Delhi) & ors.; (2014) 9 SCC 105
4. St. of U.P. Vs Brahm Datt Sharma; (1987) 2
SCC 179
5. Special Director Vs Mohd. Ghulam Ghouse;
(2004) 3 SCC 440
6. U.O.I. Vs Kunisetty Satyanarayana; (2006) 12
SCC 28
7. K.I. Shephard Vs U.O.I.; (1987) 4 SCC 431
8. V.C., Banaras Hindu University Vs Shrikant;
(2006) 11 SCC 42
9. Shekhar Ghosh Vs U.O.I.; (2007) 1 SCC 331
10. Rajesh Kumar Vs D.C.I.T.; (2007) 2 SCC 181
11. Khem Chand Vs U.O.I.; AIR 1958 SC 300
12. U.O.I. & anr. Vs Vicco Laboratories; (2007)
13 SCC 270
13. Commissioner of Central Excise, Haldia Vs
M/S. Krishna Wax (P) Ltd.; (2020) 12 SCC 572
14. Malladi Drugs and Pharma Ltd. Vs U.O.I.;
(2020) 12 SCC 808
15. U.O.I. &
ors. Vs Coastal Container
Transporters Assc. & ors.; (2019) 20 SCC 446
16. UMC Technologies Private Ltd. Vs Food
Corporation of India & anr.; (2021) 2 SCC 551
17. M/s Erusian Equipment & Chemicals Ltd. Vs
St. of W. B. & anr.; (1975) 1 SCC 70
18. Raghunath Thakur Vs St. of Bihar & ors.;
(1989) 1 SCC 229
19. Gronsons Pharmaceuticals (P) Ltd. & anr. Vs
St. of U.P. & ors.; AIR 2001 SC 3707
20. M/s Kulja Industries Ltd. Vs Chief General
Manager, W.T. Project, BSNL & ors.; (2014) 14
SCC 731
21. M/s Baba Traders Vs St. of U.P. & ors.; 2019
(11) ADJ 516 (DB)
22. Amit Kumar Vs St. of U.P. & anr.; 2020 (10)
ADJ 264 (DB)
23. Re K. (H.) (an infant); [1967] 1 All E.R. 226
24. Kanda Vs Government of Malaya; [1962] AC
322
(Delivered by Hon'ble Dr. Yogendra
Kumar Srivastava, J.)

1. The two writ petitions arise out of
similar set of facts and seek to raise challenge
to notices bearing date 18.6.2022 directing
the petitioners to show cause in respect of the
proposed action of blacklisting/debarment.
Accordingly, with the consent of the parties,
the two petitions have been heard and are
being disposed of by means of a common
order.

2. Heard Sri Prashant Chandra, learned
Senior Counsel assisted by Sri Kartikeya
Dubey and Sri Ujjawal Satsangi for the
petitioners and Sri Udit Chandra, learned
counsel for the respondents.

3. Pleadings have been exchanged
between the parties in both the petitions.

4. At the very outset, it would be
relevant to take notice of the fact that the writ
petitioner in Writ C No. 18053 of 2022 (M/S
Bcits Pvt. Ltd vs. Purvanchal Vidhyut
Vitaran Nigam Ltd. And Another) had
approached this Court earlier in Writ C No.
15363 of 2022 (M/s Bcits Pvt. Ltd. vs.
Purvanchal Vidhyut Vitaran Nigam Ltd. And
Another) seeking to challenge notice dated
18.5.2022 whereby the petitioner had been
directed to show cause in respect of a
proposed action of blacklisting/debarment.
456 INDIAN LAW REPORTS ALLAHABAD SERIES

5. The writ court allowed the writ
petition by means of a judgement dated
26.5.2022 taking into consideration the fact
that in the aforestated notice the authority
concerned
had
already
recorded
its
conclusion with regard to explanation
furnished by the petitioner earlier and had
found the same to be unsatisfactory. The
Court held that since the respondent authority
had already expressed its mind, the exercise
which was to follow would be an empty
formality. Accordingly, the notice was
quashed leaving it open to the respondent
corporation to issue a fresh notice in
accordance with law, if so advised.

6. Against a similarly worded notice
bearing same date i.e. 18.5.2022, the
petitioner in Writ C No. 18052 of 2022
(M/S Nsoft (India) Services Pvt. Ltd. vs.
Purvanchal Vidyut Vitaran And Another)
had also preferred an earlier petition being
Writ C No. 17169 of 2022 (M/s Nsoft
India Services vs. Purvanchal Vidyut
Vitaran And Another) and following the
judgement in Writ C No. 15363 of 2022
(M/s Bcits Pvt. Ltd. vs. Purvanchal Vidhyut
Vitaran Nigam Ltd. And Another), the writ
petition was disposed of in the same terms
by means of a judgment dated 16.6.2022.

7. It is pursuant to the judgments in
the earlier round of litigation, referred to
above, that the respondent no.2 issued
notices dated 18.6.2022 bearing Reference
No.
162/PuVVNL(Varanasi)/
Commercial/Billing and Reference No.
161/PuVVNL(Varanasi)/
Commercial/
Billing respectively, against the petitioners
in the two writ petitions, in terms of which
they were directed to show cause as to why
in the light of the facts stated in the notices,
the
petitioner
firms
be
not
blacklisted/debarred for a period of two
years.

8. Challenging the aforesaid notices,
the present petitions have been filed.

9.

Counsel
appearing
for
the
respondents has raised a preliminary
objection by submitting that the notices
dated 18.6.2022 which are sought to be
challenged only direct the petitioners to
answer the charges which have been
levelled against the petitioner firms with a
further mention as to why it should not be
blacklisted for a period of two years and
the decision whether to blacklist the
petitioners or not would be taken only after
objection to the show cause notices have
been submitted by the petitioners and in
view thereof, the present petitions are
premature and not maintainable.

10. Learned Senior Counsel appearing
for the petitioners while assailing the show
cause notices dated 18.6.2022 issued by the
respondent no.2, submits as under:

10.1 The notices dated 18.6.2022
though stated to be for the purpose of
giving the petitioners a show cause, is
infact in the nature of an order which has
been issued with premeditation with malice
writ large in issuing the said notices.

10.2 The notices are founded on
incorrect and incomplete facts which have
been selectively stated to prejudice the
petitioners. The entire exercise sought to be
undertaken is arbitrary and opposed to the
mandate of Article 14 of the Constitution.

10.3
The
show
cause
notices
conveniently
conceal
the
factum
of
issuance of earlier notices which had been
suitably responded by the petitioners. The
successive show cause notices issued for
the self-same reasons go to show that the
respondent authority is proceeding with
premeditation to somehow punish the
petitioners.
10 All. M/s NSOFT(IND.) Services Pvt. Ltd. Vs. Purvanchal Vidyut Vitaran Nigam Ltd. & Anr. 457

10.4 The tenor of the notices is
indicative of the fact that the respondent
authority has already made up its mind to
pass an order of blacklisting against the
petitioners and therefore, the entire exercise
which is proposed to be undertaken in
furtherance of the notice would be an
empty formality and a futile exercise. To
support his submission, learned Senior
Counsel has placed reliance upon the
decisions in Siemens Ltd. vs. State of
Maharashtra & Others1 and Oryx
Fisheries Pvt. Ltd vs. Union of India &
Others2.

10.5 An attempt has also been made to
draw attention of the Court to the merits of
the case and the defence which is sought to
be put up by the petitioner firms in
response to the imputations made in the
show cause notices.

11. The respondents have filed
counter affidavits in both the petitions in
which it has been categorically averred that
the notices dated 18.6.2022 simply call
upon the petitioner firms to submit an
explanation for violation of the various
conditions under the agreement. It is
submitted that the notices have been issued
strictly in accordance with the liberty
granted by this Court in terms of the
judgements dated 26.5.2022 and 16.6.2022
passed in the earlier writs being Writ C No.
15363 of 2022 and Writ C No. 17169 of
2022, respectively.

12. It is further submitted that the first
part of the notices contains statement of
imputations regarding alleged breaches and
default committed by the petitioners with
specific details having been given so as to
enable the petitioners to precisely know the
exact case or allegations levelled against
them in order to enable them to give a reply
to the allegations. The second part of the
notices indicates the punishment which is
proposed, in case the replies submitted by
the petitioners
are held to be not
satisfactory, and also the quantum of
punishment
which
the
respondent
authorities propose to impose on the
petitioners. It has been averred that in the
entire show cause notice there is no
whisper of any premeditation as alleged by
the petitioners. It has been further averred
that the respondent authorities have issued
the show cause notice with an open mind
calling upon the petitioners to submit reply
to the allegations which have been levelled
and it is only after reply of the petitioners is
submitted that the authority would take a
decision whether to drop the show cause
notice or to pass an order with regard to
blacklisting of the petitioners.

13. On behalf of the respondents,
reliance is sought to be placed on the
decision in the case of Gorkha Security
Services vs. Government (NCT of Delhi)
& Others3 for the proposition that in order
to fulfill the requirements of principles of
natural justice, a show cause notice in
addition to proposing the penalty/action
proposed to be taken is also required to
state the materials/grounds on the basis of
which the department proposes to take the
action.

14. Rival contentions which have
been raised across the bar would require
appreciation of the parameters under which
a show cause notice particularly in
reference
to
a
proposed
order
of
blacklisting/debarment may be issued and
the circumstances under which the validity
of a show cause notice may be assailed in
writ jurisdiction.

15. The maintainability of a writ
petition against a show cause notice was
458 INDIAN LAW REPORTS ALLAHABAD SERIES
subject matter of consideration in the case of
Siemens Ltd. wherein it was held that
ordinarily a writ court may not exercise its
discretionary jurisdiction in entertaining a
writ petition questioning a notice to show
cause unless it is without jurisdiction;
however, when a notice is issued with
premeditation,
writ
petition
would
be
maintainable.
Referring
to
the
earlier
decisions in State of U.P. vs. Brahm Datt
Sharma4 Special Director vs. Mohd.
Ghulam Ghouse5, Union of India vs.
Kunisetty Satyanarayana6, K.I. Shephard
vs. Union of India7 and V.C., Banaras
Hindu University vs. Shrikant8, it was
observed as follows:-

"9. Although ordinarily a writ court may
not exercise its discretionary jurisdiction in
entertaining a writ petition questioning a
notice to show cause unless the same inter
alia appears to have been without jurisdiction
as has been held by this Court in some
decisions including State of U.P. v. Brahm
Datt Sharma, Special Director v. Mohd.
Ghulam Ghouse and Union of India v.
Kunisetty Satyanarayana, but the question
herein has to be considered from a d-ifferent
angle viz. when a notice is issued with
premeditation, a writ petition would be
maintainable. In such an event, even if the
court directs the statutory authority to hear
the matter afresh, ordinarily such hearing
would not yield any fruitful purpose. (See
K.I. Shephard v. Union of India.) It is evident
in the instant case that the respondent has
clearly made up its mind. It explicitly said so
both in the counter-affidavit as also in its
purported show-cause notice.

10. The said principle has been followed
by this Court in V.C., Banaras Hindu
University v. Shrikant, stating: (SCC p. 60,
paras 48-49)

"48. The Vice-Chancellor appears to
have made up his mind to impose the
punishment of dismissal on the respondent
herein. A post-decisional hearing given by
the High Court was illusory in this case.

49. In K.I. Shephard v. Union of India
this Court held: (SCC p. 449, para 16)

''It is common experience that once a
decision has been taken, there is a tendency
to uphold it and a representation may not
really yield any fruitful purpose.' "

(See also Shekhar Ghosh v. Union of
India9 and Rajesh Kumar v. D.C.I.T.10)

11. A bare perusal of the order
impugned before the High Court as also the
statements made before us in the counteraffidavit filed by the respondents, we are
satisfied that the statutory authority has
already applied its mind and has formed an
opinion as regards the liability or otherwise
of the appellant. If in passing the order the
respondent has already determined the
liability of the appellant and the only
question
which
remains
for
its
consideration is quantification thereof, the
same does not remain in the realm of a
show-cause notice. The writ petition, in our
opinion, was maintainable."

16. The question as to what would be
the proper contents of a notice to show
cause, so as to be in consonance with the
principles of natural justice was considered
in the case of Oryx Fisheries (supra) and
it was observed that the notice directing
show cause must state the charges only and
not definite conclusions of alleged guilt
otherwise the entire proceeding would
stand vitiated by unfairness and bias. It was
stated thus:-

"24. ... It is well settled that a quasijudicial authority, while acting in exercise
of its statutory power must act fairly and
must act with an open mind while initiating
a show-cause proceeding. A show-cause
proceeding is meant to give the person
10 All. M/s NSOFT(IND.) Services Pvt. Ltd. Vs. Purvanchal Vidyut Vitaran Nigam Ltd. & Anr. 459
proceeded against a reasonable opportunity
of making his objection against the
proposed charges indicated in the notice.

25. Expressions like "a reasonable
opportunity of making objections" or "a
reasonable opportunity of defence" have
come up for consideration before this Court
in the context of several statutes. A
Constitution Bench of this Court in Khem
Chand v. Union of India11, of course in the
context of service jurisprudence, reiterated
certain principles which are applicable in
the present case also.

26. S.R. Das, C.J. speaking for the
unanimous Constitution Bench in Khem
Chand held that the concept of "reasonable
opportunity" includes various safeguards
and one of them, in the words of the
learned Chief Justice, is : (AIR p. 307, para
19)

"(a) An opportunity to deny his guilt
and establish his innocence, which he can
only do if he is told what the charges
levelled against him are and the allegations
on which such charges are based;"

27. It is no doubt true that at the stage
of show cause, the person proceeded
against must be told the charges against
him so that he can take his defence and
prove his innocence. It is obvious that at
that stage the authority issuing the chargesheet, cannot, instead of telling him the
charges,
confront
him
with
definite
conclusions of his alleged guilt. If that is
done, as has been done in this instant case,
the entire proceeding initiated by the showcause notice gets vitiated by unfairness and
bias and the subsequent proceedings
become an idle ceremony.

28. Justice is rooted in confidence and
justice is the goal of a quasi-judicial
proceeding also. If the functioning of a
quasi-judicial authority has to inspire
confidence in the minds of those subjected
to its jurisdiction, such authority must act
with utmost fairness. Its fairness is
obviously to be manifested by the language
in which charges are couched and conveyed
to the person proceeded against.

29. ...

30. ...

31. It is of course true that the showcause
notice
cannot
be
read
hypertechnically and it is well settled that it
is to be read reasonably. But one thing is
clear that while reading a show-cause
notice the person who is subject to it must
get an impression that he will get an
effective
opportunity
to
rebut
the
allegations contained in the show-cause
notice and prove his innocence. If on a
reasonable reading of a show-cause notice
a person of ordinary prudence gets the
feeling that his reply to the show-cause
notice will be an empty ceremony and he
will merely knock his head against the
impenetrable wall of prejudged opinion,
such a show-cause notice does not
commence a fair procedure especially when
it is issued in a quasi-judicial proceeding
under a statutory regulation which promises
to give the person proceeded against a
reasonable opportunity of defence.

32. Therefore, while issuing a showcause notice, the authorities must take care
to manifestly keep an open mind as they
are to act fairly in adjudging the guilt or
otherwise of the person proceeded against
and specially when he has the power to
take a punitive step against the person after
giving him a show-cause notice.

33. The principle that justice must not
only be done but it must eminently appear
to be done as well is equally applicable to
quasi-judicial
proceeding
if
such
a
proceeding has to inspire confidence in the
mind of those who are subject to it."

17. The scope of judicial review in
matters relating to challenge to show-cause
460 INDIAN LAW REPORTS ALLAHABAD SERIES
notice was subject matter of consideration
in Union of India and another Vs. Vicco
Laboratories12, and while holding that
non-interference at the stage of issuance of
show-cause notice is the normal rule, it was
stated that where a show-cause notice is
issued either without jurisdiction or in an
abuse of process of law, the writ court
would not hesitate to interfere even at the
stage of issuance of show-cause notice. The
observations made in the judgment in this
regard are as follows:-

"31. Normally, the writ court should
not interfere at the stage of issuance of
show-cause notice by the authorities. In
such a case, the parties get ample
opportunity to put forth their contentions
before the authorities concerned and to
satisfy the authorities concerned about the
absence of case for proceeding against the
person against whom the show-cause
notices have been issued. Abstinence from
interference at the stage of issuance of
show-cause notice in order to relegate the
parties to the proceedings before the
authorities concerned is the normal rule.
However, the said rule is not without
exceptions. Where a show-cause notice is
issued either without jurisdiction or in an
abuse of process of law, certainly in that
case, the writ court would not hesitate to
interfere even at the stage of issuance of
show-cause notice. The interference at the
show-cause notice stage should be rare and
not in a routine manner. Mere assertion by
the writ petitioner that notice was without
jurisdiction and/or abuse of process of law
would not suffice. It should be prima facie
established to be so. Where factual
adjudication
would
be
necessary,
interference is ruled out."

18. The principle that a writ petition
should normally not be entertained against
mere issuance of show-cause notice was
reiterated in Commissioner of Central
Excise, Haldia Vs. M/S. Krishna Wax (P)
Ltd.13 and it was held that the concerned
person must first raise all the objections
before the authority which had issued a showcause notice and the redressal in terms of the
existing provisions of law could be taken
resort to if an adverse order was passed
against such person.

19. A similar view had been taken in a
decision in Malladi Drugs and Pharma
Ltd. Vs. Union of India14, and the judgment
of the High Court dismissing the writ petition
against a show-cause notice was upheld.

20. Again in Union of India and
others Vs. Coastal Container Transporters
Association and others15, while examining
the scope of powers under Article 226 with
regard to quashment of a show-cause notice,
it was held that the same would not be
permissible unless there is lack of jurisdiction
or violation of principles of natural justice.

21. In the two cases before us, the
factum of service of the notices dated
18.06.2022 by the respondent-Corporation on
the petitioners requiring them to show cause
as to why an order of blacklisting be not
passed, is not in dispute. It is rather sought to
be argued that since the show cause notice
specifies the imputations, the same is
indicative of the fact that the respondent
authority has already made its mind to pass
an order of blacklisting against the petitioners
and
that
the
notices
are,
therefore
premeditated and the entire exercise proposed
to be undertaken in furtherance thereof would
be an empty formality.

22. In Gorkha Security Services3
(supra), the question pertaining to the form
and content of a show cause notice that is
10 All. M/s NSOFT(IND.) Services Pvt. Ltd. Vs. Purvanchal Vidyut Vitaran Nigam Ltd. & Anr. 461
required to be served before deciding as to
whether the noticee is to be blacklisted or
not was subject matter of consideration and
it was held that it is a mandatory
requirement to give such a show cause
notice to mention that action of blacklisting
is proposed so as to provide adequate and
meaningful opportunity to show cause
against the same. Accordingly, it was
observed that this would require the
statement of imputations detailing out the
alleged breaches and defaults so that the
noticee gets an opportunity to rebut the
same. The guidelines laid down as to the
contents of show cause notice pursuant to
which an order of blacklisting may be
passed, in the aforesaid decision, are in the
following terms:-

"21. The central issue, however,
pertains to the requirement of stating the
action which is proposed to be taken. The
fundamental purpose behind the serving of
show-cause notice is to make the noticee
understand the precise case set up against
him which he has to meet. This would
require the
statement of
imputations
detailing out the alleged breaches and
defaults he has committed, so that he gets
an opportunity to rebut the same. Another
requirement, according to us, is the nature
of action which is proposed to be taken for
such a breach. That should also be stated so
that the noticee is able to point out that
proposed action is not warranted in the
given case, even if the defaults/breaches
complained
of
are
not
satisfactorily
explained. When it comes to blacklisting,
this requirement becomes all the more
imperative, having regard to the fact that it
is harshest possible action.

22. The High Court has simply stated
that the purpose of show-cause notice is
primarily to enable the noticee to meet the
grounds on which the action is proposed
against him. No doubt, the High Court is
justified to this extent. However, it is equally
important to mention as to what would be the
consequence
if
the noticee
does not
satisfactorily meet the grounds on which an
action is proposed. To put it otherwise, we are
of the opinion that in order to fulfil the
requirements of principles of natural justice, a
show-cause notice should meet the following
two requirements viz:

(i) The material/grounds to be stated
which
according
to
the
department
necessitates an action;

(ii) Particular penalty/action which is
proposed to be taken. It is this second
requirement which the High Court has failed
to omit.

We may hasten to add that even if it is
not specifically mentioned in the show-cause
notice but it can clearly and safely be
discerned from the reading thereof, that
would be sufficient to meet this requirement."

23. The manner in which a show cause
notice is to be issued to constitute a valid
basis of a blacklisting order in the context of
government contracts and tenders was subject
matter of consideration in a recent decision in
the case of UMC Technologies Private Ltd.
Vs. Food Corporation of India and
another16 and after explaining the principles
in regard to the same in detail, it was held that
it is essential for the notice to specify the
particular grounds on which an action is
proposed to be taken so as to enable the
noticee to answer the case against him and in
the absence of the same a person cannot be
said to be granted a reasonable opportunity of
being heard. It was stated thus:-

"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
462 INDIAN LAW REPORTS ALLAHABAD SERIES
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.
Custodian
General,
Evacuee
Property
[Nasir Ahmad v. Custodian General,
Evacuee Property, (1980) 3 SCC 1] 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, particularised and
unambiguous
show-cause
notice
is
particularly crucial due to the severe
consequences of blacklisting and the
stigmatisation
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 government contracts and
as such, every eligible person is to be
afforded an equal opportunity to participate
in such contracts, without arbitrariness and
discrimination. Not only does blacklisting
take 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."

24. The adverse impact of an order of
blacklisting
and
the
need
for
strict
observance of the principles of natural
justice before passing of an order of
blacklisting
was
emphasized
in
M/s
Erusian Equipment & Chemicals Ltd.
Vs. State of West Bengal and another17
and it was observed as follows:-

"12...The order of blacklisting has the
effect of depriving a person of equality of
opportunity in the matter of public contract.
A person who is on the approved list is
unable to enter into advantageous relations
with the Government because of the order
of blacklisting. A person who has been
dealing with the Government in the matter
of sale and purchase of materials has a
legitimate interest or expectation. When the
State acts to the prejudice of a person it has
to be supported by legality.

xxx

15...The blacklisting order involves
civil consequences. It casts a slur. It creates
a barrier between the persons blacklisted
and the Government in the matter of
transactions.
The
blacklists
are
"instruments of coercion".

xxx

17...The activities of the Government
have a public element and, therefore, there
should be fairness and equality. 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.
10 All. M/s NSOFT(IND.) Services Pvt. Ltd. Vs. Purvanchal Vidyut Vitaran Nigam Ltd. & Anr. 463

xxx

19. Where the State is dealing with
individuals in transactions of sales and
purchase of goods, the two important
factors are that an individual is entitled to
trade
with
the
Government
and
an
individual is entitled to a fair and equal
treatment with others. A duty to act fairly
can be interpreted as meaning a duty to
observe certain aspects of rules of natural
justice. A body may be under a duty to give
fair consideration to the facts and to
consider the representations but not to
disclose to those persons details of
information in its possession. Sometimes
duty to act fairly can also be sustained
without providing opportunity for an oral
hearing. It will depend upon the nature of
the
interest
to
be
affected,
the
circumstances in which a power is
exercised and the nature of sanctions
involved therein.

20. 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 blacklist."

25. The aforementioned proposition
that no order of blacklisting could be
passed without affording opportunity of
hearing to the affected party was reiterated
in the case of Raghunath Thakur Vs.
State of Bihar & Ors.18 wherein it was
stated as follows:-

"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..."

26. The requirement of grant of
opportunity
to
show
cause
before
blacklisting was restated in the case of
Gronsons Pharmaceuticals (P) Ltd. &
Anr. Vs. State of Uttar Pradesh & Ors.19
and it was held that since the order
blacklisting of an approved contractor
results in civil consequences, the principle
of audi alteram partem is required to be
observed.

27. The power to blacklist a
contractor was held to be inherent in the
party allotting the contract and the freedom
to contract or not to contract was held to be
unqualified in the case of private parties;
however when the party is State, the
decision to blacklist would be open judicial
review on touchstone of proportionality and
the principles of natural justice. The
relevant observations made in this regard in
the case of M/s Kulja Industries Limited
Vs.
Chief
General
Manager,
W.T.
Project, BSNL & Ors.20 are as under:-
464 INDIAN LAW REPORTS ALLAHABAD SERIES

"17. That apart, the power to blacklist
a contractor whether the contract be for
supply of material or equipment or for the
execution of any other work whatsoever is
in our opinion inherent in the party allotting
the contract. There is no need for any such
power being specifically conferred by
statute or reserved by contractor. That is
because "blacklisting" simply signifies a
business decision by which the party
affected by the breach decides not to enter
into any contractual relationship with the
party committing the breach. Between two
private parties the right to take any such
decision is absolute and untrammelled by
any constraints whatsoever. The freedom to
contract or not to contract is unqualified in
the case of private parties. But any such
decision is subject to judicial review when
the same is taken by the State or any of its
instrumentalities. This implies that any
such decision will be open to scrutiny not
only on the touchstone of the principles of
natural justice but also on the doctrine of
proportionality. A fair hearing to the party
being blacklisted thus becomes an essential
precondition for a proper exercise of the
power and a valid order of blacklisting
made pursuant thereto. The order itself
being reasonable, fair and proportionate to
the gravity of the offence is similarly
examinable by a writ court."

28. The aforesaid legal position has
been recently considered in M/s Baba
Traders Vs. State of U.P. and others21
and Amit Kumar Vs. State of U.P. and
another.22

29. It would therefore be seen that an
order of blacklisting has the effect of
depriving a person equality of opportunity
in the matter of public contract and in a
case where the State acts to the prejudice of
a person it has to be supported by legality.
The activities of the State having the public
element quality must be imbued with
fairness and equality.

30. The order of blacklisting involves
civil consequences and has the effect of
creating a disability by preventing a person
from the privilege and advantage of
entering into lawful relationship with the
government therefore fundamentals of fair
play would require that the concerned
person should be given an opportunity to
represent his case before he is put on the
blacklist. A fair hearing to the party before
being blacklisted thus becomes an essential
pre-condition for a proper exercise of the
power and a valid order of blacklisting
made pursuant thereto. The applicability of
the principle of audi alteram partem and the
necessity of issuance of show cause notice
also becomes imperative before passing of
any such order of blacklisting.

31. It would therefore follow as a
legal proposition that in order for a show
cause notice to constitute a valid basis for
passing of an order of blacklisting, the
notice must spell out the imputations
specifying
the
alleged
breaches
and
defaults indicating the intent of the issuer
of the notice to blacklist the noticee so as to
ensure that the noticee has an adequate
informed and meaningful opportunity to
rebut the allegations and to show cause
against the proposed blacklisting.

32. In order to ensure conformity with
the principles of natural justice, a show
cause notice is required to specify as to
what would be the consequences if the
noticee does not satisfactorily meet the
grounds on which the action is proposed.
The notice apart from being adequate is
also
required
to
state
the
grounds
necessitating the action and the penalty
10 All. M/s NSOFT(IND.) Services Pvt. Ltd. Vs. Purvanchal Vidyut Vitaran Nigam Ltd. & Anr. 465
proposed is also required to be mentioned
specifically and unambiguously. A show
cause notice, particularly in a case where it
proposes to impose an order of blacklisting,
is required to adhere to the principles of
natural justice and for the said reason is to
fulfill the twin requirements of stating in
unambiguous terms the grounds which
according to the department necessitates an
action, and also the penalty which is
proposed to be taken in case the noticee is
unable to furnish an adequate response to
the grounds stated in the notice.

33. The principle of audi alteram partem
has been held to be a sina qua non and a basic
tenet underlying the principles of natural justice.
In Re K. (H.) (an infant)23, Lord Parker
C.J., described natural justice as 'a duty to act
fairly'. The rule of 'fair hearing' requires that the
party which is likely to be visited with adverse
consequences is given an opportunity to meet
the case against it effectively. Right to 'fair
hearing' or 'reasonable opportunity of hearing'
casts a sacrosanct obligation on the adjudicatory
authority to ensure fairness in procedure and
action. It covers within its fold every stage
through which an administrative adjudication
passes - starting from notice to final
determination.

34. Procedural fairness requires that
persons liable to be affected by a proposed
administrative decision be given adequate
notice of what is proposed so that they are not
taken unfairly by surprise, and also that they are
in a position to make representation against the
proposed action; to appear at the hearing or the
inquiry; and to effectively answer the charges
which they have to meet. A proper hearing must
always include an opportunity to know the
opposing case. We may refer to the
observations of Lord Denning in Kanda vs.
Government of Malaya24, which are as
follows:-