# M/s Virat Constructions And Anr v. State of U.P. And Ors

- **Citation:** (2019) 1 ILRA 1139
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2019-07-08
- **Case number:** Writ C No. 21236 of 2019
- **Bench:** Bala Krishna Narayana, Prakash Padia
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-virat-constructions-and-anr-v-state-of-u-p-and-ors-44418
- **Pages:** 7

## Headnote

A. Administrative Law - BlacklistingSerious civil consequences-opportunity
of hearing is essential and a prerequisite.

Petitioner could not have been blacklisted
without being afforded an opportunity of
hearing. It cannot be disputed that an order of
1140 INDIAN LAW REPORTS ALLAHABAD SERIES
blacklisting
does
carry
serious
civil
consequences. It therefore follows as a
necessary corollary that an adherence to the
fundamental precepts of natural justice is
essential and a prerequisite. (Para 14)

Cases referred: -

## Text

1 All. M/s Virat Constructions And Anr. Vs. State of U.P. And Ors.
1139
revenue record that only one crop had
been sown. From a bare perusal of the
findings which are returned, it is evident
that the Appellate Authority has firstly not
recorded any finding that the entire land
holding of the respondent was unirrigated.
Even if he had found that a majority of
the plots were unirrigated, this would
have
necessarily
entailed
a
further
exercise of demarcating plots between the
category of irrigated and unirrigated being
undertaken. In any case the Appellate
Authority does not record any finding that
may dislodge the recordal of fact by the
Prescribed Authority in his original order
where he had held that the land did fall in
the
command
area.
The
Appellate
Authority has also not borne in mind that
in terms of Section 4A it was incumbent
upon the authorities concerned to also
evaluate whether the land was in fact
"capable of" being utilised for sowing two
crops as distinct from whether two crops
had in fact been sown. As is evident from
the
language
employed
and
the
highlighted part of Section 4A extracted
above, land which is "capable of" bearing
at least two crops is also a determinative
factor
of
whether
it
should
be
characterized as irrigated or unirrigated. It
is thus evident that the order of the
Prescribed Authority as was affirmed by
the Appellate Authority could not be said
to be suffering from any palpable or
apparent error on the face of the record
which would have warranted the exercise
of power of review. The Appellate
Authority has clearly undertaken an
exercise of a re-appreciation of the
evidence which existed and sought to
revise and revisit a final decision that had
been made. This was clearly an exercise
beyond
jurisdiction
and
cannot
be
sustained in law. In light of the above, this
Court is of the considered view that the
order of 18 October 2002 merits being set
aside.

19. The petition is accordingly
allowed. The impugned order dated 18
October 2002 is hereby quashed. Sri M.N.
Singh, learned counsel appearing for the
tenure holder, in the end submitted that
since proceedings had been brought to a
close by virtue of the impugned order, the
respondent was never dispossessed and
therefore, he be permitted to invoke the
provisions of Section 12 A of the Act
before the State proceeds in the matter.
Sri Goswami learned Additional Chief
Standing Counsel states that subject to
verification of the aforesaid statement, the
petitioner shall, as is duty bound, proceed
in the matter in accordance with law.
--------
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 08.07.2019

BEFORE
THE HON'BLE BALA KRISHNA NARAYANA, J.
THE HON'BLE PRAKASH PADIA, J.

Writ C No. 21236 of 2019

M/s Virat Constructions And Anr.
 ...Petitioners
Versus
State of U.P. And Ors. ...Respondents

Counsel for the Petitoners:
Sri Udayan Nandan, Sri Shashi Nandan

Counsel for the Respondents:
C.S.C.

A. Administrative Law - BlacklistingSerious civil consequences-opportunity
of hearing is essential and a prerequisite.

Petitioner could not have been blacklisted
without being afforded an opportunity of
hearing. It cannot be disputed that an order of
1140 INDIAN LAW REPORTS ALLAHABAD SERIES
blacklisting
does
carry
serious
civil
consequences. It therefore follows as a
necessary corollary that an adherence to the
fundamental precepts of natural justice is
essential and a prerequisite. (Para 14)

Cases referred: -

1. Erusian Equipment and Chemical Ltd. Vs.
State of West Bengal (1975) 1 SCC 70

2. Gorkha Security Services vs. Government of
NCT of Delhi and others 92014) 9 SCC 105

3. Raghunath Thakur vs. State of Bihar (1989)
1 SCC 229

4. M/s Mahabir Auto Stores and others vs. Indian
oil corporation Ltd.(1990) 3 SCC 752 (E-9)

(Delivered by Hon'ble Prakash Padia, J.)

1. Heard Shri Shashi Nandan
learned Senior Advocate assisted by Sri
Udayan Nandan learned counsel for the
petitioners and Ms. Archana Singh,
learned
Additional
Chief
Standing
Counsel
learned
counsel
for
the
respondents.

2. The petitioners have preferred the
present writ petition writ challenging the
order
31.5.2019
and
consequential
recovery certificate dated 1/4.6.2019
(Annexure Nos.4 and 5 to the writ petition
respectively) passed by the District
Magistrate, Shahjahanpur.

3. Facts in brief, as contained in the
writ petition are that the petitioners were
granted lease on 15th February, 2018 for a
period of five years, i.e., from 15.2.2018
to 14.2.2023 at the rate of Rs.604/- per
cubic meter for the first year with a
stipulation of 10% increase in the said
amount in each successive year during the
currency of the lease. After the aforesaid
lease
was
granted,
the
petitioners
deposited a sum of Rs.1,64,95,995/-
towards security as per the terms of the
lease
deed.
A
further
amount
of
Rs.1,64,95,995/- was payable by the
petitioners during the first year of the
lease period in four equal installments.
From the date of execution of the lease
deed, the petitioners started excavating
the minerals from the area forming part of
the lease deed as per the terms and
conditions of the lease deed dated
15.2.2018.

4. It is contended in the writ petition
that respondent No.2 on a number of
occasions orally directed the petitioners to
stop the work of excavation without any
rhyme and reason and as such, the
petitioners were unable to pay certain
installments on time as per the payment
schedule of the lease deed, a show-cause
notice dated 16.2.2019 was issued by the
District Mining Officer/respondent No.3
to
the
petitioners
levelling
certain
allegations
to
the
effect
that
the
petitioners are executing mining lease in
contravention of the terms and conditions
of the lease deed and Minor Mineral
Concession Rules, 1963. A further
allegation was made in the show-cause
notice that the petitioners have failed to
pay some amount with regard to the
fourth installment of the first year and
first installment of the second year, thus,
an amount of Rs.2,46,41,590/- was liable
to be paid by the petitioners. The
petitioners submitted a reply vide reply
dated 8.3.2019.

5. It is further contended in
paragraph 13 of the writ petition that on
16.4.2019, the petitioners addressed a
communication to the respondent No.2
stating
therein
that
the
District
Administration are completely non-co-
1 All. M/s Virat Constructions And Anr. Vs. State of U.P. And Ors.
1141
operative and created various difficulties
in running the excavation work by the
petitioners. It is contended that without
considering the reply submitted by the
petitioners, respondent No.2 passed order
dated 31.5.2019 cancelling the lease deed
granted in favour of the petitioners and
blacklisted the petitioners' firm for a
period of five years and the respondent
No.2 has also directed for recovery of
Rs.3,37,38,653.30/-
along
with
10%
amount payable on royalty and 2% TDS
along with 18% interest per year.

6. After the aforesaid order dated
31.5.2019 was passed, a consequential
recovery certificate dated 1/4.6.2019 was
also issued against the petitioners for
recovery of amount of Rs.3,97,87,185/-
along with 2% TDS and 10% mineral
development charges. The total amount
payable by the petitioners as per the
recovery certificate is Rs.4,79,72,794.17/-
. The petitioners have filed the present
writ petition challenging the order of
blacklisting dated 31.5.2019 as well as
recovery certificated dated 1/4.6.2019
issued by the respondent No.2, copies of
which are appended as Annexure Nos.4
and 5 to the writ petition respectively.

7. It is contended by Sri Shashi
Nandan, learned Senior Counsel that
order
dated
31.05.2019
passed
by
respondent No.2 is wholly illegal and
arbitrary and has been passed without
providing any opportunity of hearing to
the petitioners. It is further contended that
a reply of the petitioners dated 8.3.2019
was not at all taken into consideration,
while passing the order dated 31.5.2019.
It is further contended that the District
Level Committee under the chairmanship
of Additional District Magistrate was
formed by the order of the District
Magistrate on 11.3.2019 and the said
committee
submitted
its
report
on
24.4.2019. It is contended that the report
submitted
by
the
Committee
dated
24.4.2019 has formed the basis of the
impugned order passed by the respondent
No.2. However, the petitioners have never
been provided copy of the said report
before passing the order impugned dated
31.5.2019. It is further contended that the
petitioners are entitled to get a copy of the
report submitted by the District Level
Committee
dated
24.4.2019
before
passing the order impugned. It is further
contended that since the copy of the
aforesaid report was not provided to the
petitioners which was heavily relied upon
by respondent No.2 while passing the
order impugned, therefore, the order
impugned is liable to be set aside only on
account of non-supplying of the said
report.

8. Heard learned counsel for the
parties. With the consent of learned
counsel for the parties, the present writ
petition is disposed of at the admission
stage itself without calling a counter
affidavit from the respondents.

9. From perusal of the facts which
are not disputed by the learned Additional
Chief Standing Counsel, it appears that
before passing the order of blacklisting,
no opportunity of hearing whatsoever has
been provided to the petitioners. It is
further not disputed that copy of the
report
submitted
by
District
Level
Committee dated 24.2.2019, which was
relied upon by respondent No.2 while
passing the order dated 31.5.2019, was
never
supplied
to
the
petitioners.
Although the order of blacklisting having
serious civil consequences but in the
present case before passing the same, no
1142 INDIAN LAW REPORTS ALLAHABAD SERIES
opportunity of hearing has been provided
to the petitioners at any point of time. The
law on the subject of blacklisting is well
settled in light of numerous decisions of
the Supreme Court on this subject.

10. In the case of Erusian
Equipment & Chemicals Ltd. Vs. State of
West Bengal (1975) 1 SCC 70, it was
held
by
the
Supreme
Court
that
blacklisting has the affect of preventing a
person from the privilege and advantage
of name into relationship with the
Government for purpose of aim. It was
held by the Supreme Court in the
aforesaid case that the fundamentals of
fair play require that a person concerned
should be given an opportunity to
represent his case. Paragraphs 12 and 20
of the said judgment is quoted below :-

"12. Under Article 298 of the
Constitution the executive power of the
Union and the State shall extend to the
carrying on of any trade and to the
acquisition, holding and disposal of
property and the making of contracts for
any purpose. The State can carry on
executive function by making a law or
without making a law. The exercise of
such powers and functions in trade by the
State is subject to Part III of the
Constitution. Article 14 speaks of equality
before the law and equal protection of the
laws. Equality of opportunity should
apply to matters of public contracts. The
State has the right to trade. The State has
there the duty to observe equality. An
ordinary individual can choose not to
deal with any person. The Government
cannot choose to exclude persons by
discrimination. 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.

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."

11. Further in the case of Gorkha
Security Services Vs. Government of
NCT of Delhi & Others (2014) 9 SCC
105, the Supreme Court reiterated the
principles laid down in the case of
Erusian Equipment & Chemicals Ltd. v.
State of W.B. (supra) and highlighted the
necessity of giving an opportunity of
hearing or show-cause before blacklisting
him. Paragraph 17 of the aforesaid
judgement is quoted below:-

17. Way back in the year
1975, this Court in Erusian Equipment
& Chemicals Ltd. v. State of W.B.
[Erusian Equipment & Chemicals Ltd.
v. State of W.B., (1975) 1 SCC 70] ,
highlighted the necessity of giving an
opportunity to such a person by
serving a show-cause notice thereby
giving him opportunity to meet the
allegations which were in the mind of
the
authority
contemplating
blacklisting of such a person."
1 All. M/s Virat Constructions And Anr. Vs. State of U.P. And Ors.
1143

12. Again in the case of Raghunath
Thakur Vs. State of Bihar [(1989) 1 SCC
229]
the
aforesaid
principles
was
reiterated in the following manner: (SCC
p. 230, para 4).

"4. ........ 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. In that view of the
matter, the last portion of the order
insofar as it directs blacklisting of the
appellant in respect of future contracts,
cannot be sustained in law.........."

20. Thus, there is no dispute about
the requirement of serving show-cause
notice. We may also hasten to add that once
the show-cause notice is given and
opportunity to reply to the show-cause notice
is afforded, it is not even necessary to give an
oral hearing. The High Court has rightly
repudiated the appellant's attempt in finding
foul with the impugned order on this ground.
Such a contention was specifically repelled
in Patel Engg. [Patel Engg. Ltd. v. Union of
India, (2012) 11 SCC 257 : (2013) 1 SCC
(Civ) 445]."

13. In the case of M/s Mahabir Auto
Stores &Ors. Vs. Indian Oil Corporation
Ltd. (1990) 3 SCC 752 it was held by the
Supreme Court that arbitrariness and
discrimination in every matter is subject
to judicial review. Paragraph 11 of the
aforesaid judgement is quoted below :-

"It is well settled that every
action of the State or an instrumentality of
the State in exercise of its executive
power, must be informed by reason. In
appropriate cases, actions uninformed by
reason may be questioned as arbitrary in
proceedings under Article 226 or Article
32 of the Constitution. Reliance in this
connection may be placed on the
observations of this Court in M/s Radha
Krishna Agarwal &Ors. v. State of Bihar
&Ors., [1977] 3 SCC 457.1t appears to
us, at the outset, that in the facts and
circumstances of the case, the respondentcompany IOC is an organ of the State or
an instrumentality of the State as
contemplated under Article 12 of the
Constitution. The State acts in its
executive power under Article 298 of the
Constitution in entering or not entering in
contracts with individual par- ties. Article
14
of
the
Constitution
would
be
applicable to those exercises of power.
Therefore, the action of State organ under
Article 14 can be checked. M/s Radha
Krishna Agarwal v. State of Bihar,
(supra) at p. 462, but Article 14 of the
Constitution cannot and has not been
construed as a charter for judicial review
of State action after the contract has been
entered into, to call upon the State to
account for its actions in its manifold
activities by stating reasons for such
actions. In a situation of this nature
certain activities of the respondent
company which constituted State under
Article 12 of the Constitution may be in
certain circumstances subject to Article
14 of the Constitu- tion in entering or not
entering into contracts and must be
reasonable and taken only upon lawful
1144 INDIAN LAW REPORTS ALLAHABAD SERIES
and relevant consideration, it depends
upon facts and circumstances of a
particular transaction whether heating is
necessary and reasons have to be stated.
In case any right conferred on the citizens
which is sought to be interfered, such
action is subject to Article 14 of the
Constitution, and must be reasonable and
can be taken only upon lawful and
relevant grounds of public interest. Where
there is arbitrariness in State action of
this type of entering or not entering into
contracts, Article 14 springs up and
judicial review strikes such an action
down. Every action of the(1975) 1 SCC
70. State executive authority must be
subject to rule of law and must be
informed by reason. So, whatever be the
activity of the public authority, in such
monopoly or semi-monopoly dealings, it
should meet the test of Article 14 of the
Constitution. If a Governmental action
even in the matters of entering or not
entering into contracts, fails to satisfy the
test of reasonableness, the same would be
unrea-
sonable.
In
this
connection
reference may be made to E.P. Royappa
v. State of Tamil Nadu &Anr., [1974] 4
SCC 3; Maneka Gandhi v. Union of India
&Anr., [1976] 1 SCC 248; Ajay Hasia
&Ors. v. Khalid Mujib Sehravardi &Ors.,
[1981] 1 SCC 722; R.D. Shetry v.
International Airport Authority of India
&Ors., [1979] 3 SCC 1 and also
Dwarkadas Marlaria and sons v. Board
of Trustees of the Port of Bombay, [1989]
3 SCC 293. It appears to us that rule of
reason and rule against arbitrariness and
discrimination, rules of fair play and
natural justice are part of the rule of law
applicable in situation or action by State
instrumentality in dealing with citizens in
a situation like the present one. Even
though the rights of the citizens are in the
nature of contractual rights, the manner,
the method and motive of a decision of
entering or not entering into a contract,
are subject to judicial review on the
touchstone
of
relevance
and
reasonableness, fair play, natural justice,
equality and non-discrimination in the
type of the transactions and nature of the
dealing as in the present case."

14. From perusal of the the aforesaid
legal preposition, which itself is a
reiteration of the principles laid down by
the Supreme Court in Erusian Equipment
& Chemicals Ltd. v. State of W.B.
(supra), we are of the view that the
petitioner could not have been blacklisted
without being afforded an opportunity of
hearing. It cannot be disputed that an
order of blacklisting does carry serious
civil consequences. It therefore follows as
a necessary corollary that an adherence to
the fundamental precepts of natural
justice is essential and a prerequisite.

15. Since in the facts of the present
case, there is a complete failure to follow
due process, we find ourselves unable to
sustain the order dated 31.05.2019 and the
recovery certificate dated 1/4.6.2019
passed by the respondent No.2 (Annexure
No.4
and
5
to
the
writ
petition
respectively)

16. We accordingly allow the writ
petition and quash the the order dated
31.05.2019 and the recovery certificate
dated 1/4.6.2019. We further clarify that
in case the respondents do choose to
initiate fresh proceedings for blacklisting
the firm of the petitioner, we leave it open
to them to do so subject to the observation
that the proceedings if initiated shall be
undertaken in accordance with law and
the observations appearing herein above.
------
1 All. Babban Singh Vs. State of U.P. And Others
1145
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 22.07.2019

BEFORE
THE HON'BLE BALA KRISHNA NARAYANA, J.
THE HON'BLE PRAKASH PADIA, J.

Writ - C No. 23689 of 2019

Babban Singh ...Petitioner
Versus
State of U.P. And Others. ...Respondents

Counsel for the Petitioner:
Sri Hanuman Prasad Dube, Sri Vipul Dube

Counsel for the Respondents:
C.S.C

A. Administrative Law- Natural Justice-
notice issued by senior mines officer,
Prayagraj but the order was passed by the
District magistrate, Prayagraj. Invalid.
Purpose behind serving show cause notice is
to apprise case and action to be taken against
the
delinquent-Petitioner
was
blacklisted
without mentioning the same in the show
cause notice.

Held: - 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 notice 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 notice 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
black
listing,
this
requirement becomes all the more imperative,
having regard to the fact that it is harshest
possible action. (Para 17)
Cases cited: -

1.Gorkha security Services vs. Government
(NCT of Delhi) and others(2014) 9 SCC 105

2. Erusian Equipment and Chemical Ltd. Vs.
State of West Bengal (1975) 1 SCC 70

3. Raghunath Thakur vs. State of Bihar (1989)
1 SCC 229

4. M/s Mahabir Auto Stores and others vs. Indian
oil corporation Ltd.(1990) 3 SCC 752 (E-9)

(Delivered by Hon'ble Prakash Padia, J.)

1. Heard Sri Hanuman Prasad Dube,
learned counsel for the petitioner and
Smt. Archana Singh, learned Additional
Chief Standing Counsel representing
respondents-State.

2. The petitioner has filed the
present writ petition with the prayer to
quash the order dated 21.6.2019 passed by
respondent No.2 with a further prayer to
issue a mandamus commanding the
respondent No.2 to give effect to the
impugned dated 21.6.2019. A further
prayer is also made to issue a Mandamus
directing the respondent to determine the
contract of the petitioner with respect to
the mining lease and further to refund the
amount deposited by the petitioner under
the agreement dated 1.2.2018 including
the amount of security along with interest
at the market rate.

3. Facts in brief as contained in the
writ petition are that the petitioner is a
Class
A
category
contractor
and
registered in various departments of the
State Government. An advertisement
No.824
dated
7.9.2017
was
published/uploaded on the website of the
respondents
inviting
e-tenders
for
allotment of mining lease of various