Court No. - 4
Case :- WRIT - C No. - 24571 of 2019 Petitioner :- M/S S.R. Traders Respondent :- State Of U P And 3 Others Counsel for Petitioner :- Sanjay Dwivedi, Desh Ratan Chaudhary Counsel for Respondent :- C.S.C.
Hon'ble Bala Krishna Narayana,J. Hon'ble Prakash Padia,J.
Per: Hon’ble Prakash Padia, J.
1. Heard learned counsel for the petitioner and Smt. Archana Singh, learned Additional Chief Standing Counsel representing respondents- State.
2. The petitioner has preferred the present writ petition challenging the order dated 25.02.2019 passed by the District Magistrate Mirzapur/respondent No.3, copy of which is appended as Annexure 1 to the writ petition. A further prayer is made to issue a mandamus directing the respondents to decide the petitioner’s representations and decide the issue of surrender/cancellation of petitioner’s lease deed in view of his applications dated 07.05.2018/16.05.2018 and thereafter make proper accounting, recalculation and adjusting of the deposits made by the petitioner against his liabilities.
3. Facts in brief as contained in the writ petition are that State Government issued a Government Order dated 14.8.2017 for grant of mining lease, excavation of minor minerals from the river bed which has to be settled by way of e-tendering process. Pursuant to the aforesaid Government Order, the respondent No.3 issued a public notice inviting tenders for several minor lease areas and invited online application from the interested persons to participate in e-tender/e-auction proceeding for grant of mining lease. The petitioner duly participated in respect of the lease area of Plot No.1594/1 measuring area 12.35 acre situated in village Ram Nagar Sikri, Diostrict Mirzapur.
4. The petitioner participated in the proceedings of e-tender/e-auction in respect of the aforesaid area and deposited processing fee and earnest money. The bid submitted by the petitioner was duly accepted by the respondents. Subsequently, he was allowed the lease of mining for a period of five years, i.e., since 01.02.2018 to 31.01.2023.
5. After the execution of the lease deed, the petitioner found that only 3465 cubic meter sand is available. The petitioner personally went to the office of respondent Nos.3 and 4 and informed them about non- availability of the sand at the place of mining lease and requested the authorities to allot some other plot. The respondent Nos.3 and 4 had expressed their inability to change the site of mining. In these circumstances, the petitioner moved an application on 7.5.2018 surrendering his lease deed and has prayed for its revocation in view of the non-availability of the minerals. When no action was taken by the respondent No.3, the petitioner sent a reminder on 16.5.2018 to the respondent Nos.1, 3 and 4 (Annexure 3 to the writ petition).
6. It is contended that respondent No.4 issued a notice on 12.06.2018 to the petitioner demanding Rs.16,75,000/- towards the second installment of the mining lease. The petitioner duly submitted his reply on 27.6.2018 stating therein that the petitioner has already moved an application surrendering his lease and prayed for cancellation of the lease.
7. It is further contended that a demand notice dated Nil was issued by the respondent No.4 demanding a sum of Rs.54,13,653/- from the petitioner, copy of the aforesaid demand notice is appended as Annexure 6 to the writ petition. In the aforesaid demand notice, it is stated that the lease deed executed in favour of the petitioner has already been cancelled by the District Magistrate vide order dated 26.10.2018 due to the reason that installments were not paid by the petitioner well within time. The petitioner submitted various representations in this regard but the respondent No.3 passed the order impugned dated 25.2.2019 stating therein that since the installments were not paid by the petitioner within time, his lease deed has already been cancelled on 26.10.2018. By the aforesaid order, the petitioner was also blacklisted for a period of five years, copy of the order impugned dated 25.2.2019 is appended as Annexure 1 to the writ petition.
8. It is further contended that since the demand notice was issued to the petitioner without considering the representations dated 26.07.2018 written by the petitioner addressed to the respondent No.4. It is contended that till date no decision has been taken by the respondents on the representations dated 30.03.2019 and 17.6.2019submitted by the petitioner. In view of the same, the petitioner has preferred the present writ petition challenging the order dated 25.2.2019 passed by respondent No.3 on the ground that there is absolutely no fault of the petitioner in not making payment of the royalty.
9. It is further contended that there is a complete misrepresentation on the part of the respondents by mentioning that 5,00,000/- cubic meters sand is available on the site while the sand available was to the extent of 4,000 cubic meter only. It is further contended that the order of blacklisting of the petitionere for five years was passed without any rime or reason and is wholly illegal, unjust, improper and is liable to be set aside.It is further contended that the order of blacklisting has been passed in complete violation of principles of natural justice.
10. Heard learned counsel for the petitioner and perused the record. With the consent of learned counsel for the parties, this writ petition is disposed of finally at the admission stage itself.
11. From perusal of the writ petition it is clear that no opportunity of personal haring whatsoever has been given to the petitioner before passing the order impugned by which the lease of the petitioner was cancelled and security amount was forfeited and he was also blacklisted for five years. Apart from the same, notices were issued to the petitioner by the respondent No.4 but the order impugned has been passed by the District Magistrate. Mirzapur.
12. The petitioner has assailed the order dated 25.02.2019 passed by respondent No.3/District Magistrate by which the petitioner was directed to deposit an amount as demanded vide letter dated 27.11.2018 and further the petitioner was blacklisted for five years.
13. From perusal of the record it is clear that before passing the impugned order no opportunity of hearing was given to the petitioner. It is also clear from perusal of the record that notices were issued by the In- charge Officer but the impugned order was passed by the respondent No.3, i.e. District Magistrate Mirzapur. Apart from the same, it is also clear that although nothing is contained in the show cause notice regarding factum of blacklisting of the petitioner but while passing the order impugned, the petitioner was also blacklisted for a period of two years.
14. The order impugned is in two parts:-
(i) recovery against the petitioner
(ii) blacklisting of the petitioner for five years.
15. Insofar as the first part is concerned, it is clear from the record that the notices were issued to the petitioner by the In-charge Officer, Mirzapur but the order was passed by District Magistrate Mirzapur, in this view of the matter, we are of the opinion that the order passed by the District Magistrate Mirzapur is in complete violation of principles of natural justice.
16. Insofar as the blacklisting of the petitioner is concerned, From perusal of the impugned order, we find that the respondents have proceeded on the basis of a show cause notice. Nothing has been stated in the show cause notice regarding blacklisting of the petitioner. Learned Standing Counsel has not been able to refute this fact on record. In our opinion, the issue which was not raised even in the show cause notice, therefore, could not be made the basis for blacklisting of the petitioner.
17. 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 black listing, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action. In the case of Gorkha Security Services Vs. Government (NCT of Delhi) and others (2014) 9 SCC 105, the Supreme Court was pleased to hold that it is incumbent on the part of the department to state in show cause notice that the competent authority intended to impose such a penalty of blacklisting, so as to provide adequate and meaningful opportunity to show cause against the same. Relevant paragraph namely paragraph 27 of the aforesaid judgement is quoted below:-
“27. We are, therefore, of the opinion that it was incumbent on the part of the Department to state in the show cause notice that the competent authority intended to impose such a penalty of blacklisting, so as to provide adequate and meaningful opportunity to the appellant to show cause against the same. However, we may also add that even if it is not mentioned specifically but from the reading of the show cause notice, it can be clearly inferred that such an action was proposed, that would fulfill this requirement. In the present case, however, reading of the show cause notice does not suggest that noticee could find out that such an action could also be taken. We say so for the reasons that are recorded hereinafter.”
18. 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."
19. 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]."
20. 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 respondent-company 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 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.”
21. 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 21.06.2019 passed by the respondent No.3.
22. We accordingly allow the writ petition and quash the the order dated 25.2.2019. We further clarify that in case the respondents do choose to initiate fresh proceedings against 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.
Order Date :- 26.7.2019 saqlain