UMC TECHNOLOGIES PRIVATE LIMITED versus FOOD CORPORATION OF INDIA AND ANR.

[2020] 13 S.C.R. 1175

UMC TECHNOLOGIES PRIVATE LIMITED

FOOD CORPORATION OF INDIA AND ANR.

(Civil Appeal No. 3687 of 2020)

NOVEMBER 16, 2020

[S. ABDUL NAZEER AND B. R. GAVAI, JJ.]

Contract – Termination of – Blacklisting by Corporation –The Corporation had issued Bid Document inviting bids forappointment of recruitment agency to conduct the process orrecruitment for hiring watchmen – The appellant was declared asthe successful bidder – The appellant conducted written exam foreligible aspirants for the post of watchmen with the Corporation –On the same day Special Task Force of Police arrested 50 persons,who were in possession of certain handwritten documents whichprima facie appeared to be the question papers related to theexamination conducted by the appellant – The Corporation issueda show cause notice dated 10.04.2018 to the appellant and allegedthat the appellant had breached various clauses of the Bid document– By its order dated 09.01.2019, the Corporation concluded thatthe shortcomings/negligence on part of the appellant stoodestablished beyond any reasonable doubt and proceeded to terminateits contract with the appellant and also blacklisted the appellantfrom participating in any future tenders of the Corporation for aperiod of 5 years – Writ petition filed by the appellant before theHigh Court was dismissed – Before the Supreme Court, the appellantsubmitted that it only seeks to contest the issue of blacklisting andnot the termination of the contract between the appellant and theCorporation – Held: prior show cause notice granting areasonable opportunity of being heard is an essential element of alladministrative decision-making and particularly so in decisionspertaining to blacklisting which entail grave consequences for theentity being blacklisted – In these cases, furnishing of valid showcause notice is critical and failure to do so would be fatal to anyorder of blacklisting pursuant thereto – show cause notice mustspell out clearly, or its contents be such that it can be clearly inferredtherefrom, that there is intention on the part of the issuer of thenotice to blacklist the noticee – In the instant case, the show cause

Anotice makes it clear that the action of blacklisting was neitherexpressly proposed nor could it have been inferred from the languageemployed by the Corporation in its show cause notice – It wasincumbent on the part of the Corporation to clarify in the showcause that it intended to blacklist the appellant, so as to provideadequate and meaningful opportunity to the appellant to show causeBagainst the same – Therefore, the show cause notice dated10.04.2018 does not fulfil the requirements of valid show causenotice for blacklisting – The Corporations’s order dated 09.01.2019is quashed only so far as it blacklist the appellant from participatingin future tenders.CAllowing the appeal, the Court

HELD: 1. In the context of blacklisting of person or anentity by the state or state corporation, the requirement of avalid, particularized and unambiguous show cause notice isparticularly crucial due to the severe consequences of blacklistingDand the stigmatization that accrues to the person/entity beingblacklisted. Here, it may be gainful to describe the concept ofblacklisting and the graveness of the consequences occasionedby it. Blacklisting has the effect of denying person or an entitythe privileged opportunity of entering into government contracts.EThis privilege arises because it is the State who is thecounterparty in government contracts and as such, every eligibleperson is to be afforded an equal opportunity to participate insuch contracts, without arbitrariness and discrimination. Not onlydoes blacklisting takes away this privilege, it also tarnishes theblacklisted person’s reputation and brings the person’s characterFinto question. Blacklisting also has long-lasting civilconsequences for the future business prospects of the blacklistedperson. [Para 14][1183-E-H; 1184-A]2. In light of the various Supreme Court decisions, it isclear that prior show cause notice granting reasonableGopportunity of being heard is an essential element of alladministrative decision-making and particularly so in decisionspertaining to blacklisting which entail grave consequences forthe entity being blacklisted. In these cases, furnishing of validshow cause notice is critical and failure to do so would be fatalHto any order of blacklisting pursuant thereto. [Para 19][1186-B-C]

UMC TECHNOLOGIES PRIVATE LIMITED v. FOOD CORPORATION1177OF INDIA AND ANR.

3. The legal position is clear that for show cause notice toconstitute the valid basis of blacklisting order, such notice mustspell out clearly, or its contents be such that it can be clearlyinferred therefrom, that there is intention on the part of the issuerof the notice to blacklist the noticee. Such clear notice isessential for ensuring that the person against whom the penaltyof blacklisting is intended to be imposed, has an adequate,informed and meaningful opportunity to show cause against hispossible blacklisting. [Para 21][1187-E-F]

4. plain reading of the notice makes it clear that the actionof blacklisting was neither expressly proposed nor could it havebeen inferred from the language employed by the Corporation inits show cause notice. After listing 12 clauses of the “Instructionto Bidders”, which were part of the Corporation’s Bid Documentdated 25.11.2016, the notice merely contains vague statementthat in light of the alleged leakage of question papers by theappellant, an appropriate decision will be taken by theCorporation. [Para 24][1188-G-H]

5. The mere existence of clause in the Bid Document,which mentions blacklisting as bar against eligibility, cannotsatisfy the mandatory requirement of clear mention of theproposed action in the show cause notice. The Corporation’snotice is completely silent about blacklisting and as such, it couldnot have led the appellant to infer that such an action could betaken by the Corporation in pursuance of this notice. Had theCorporation expressed its mind in the show cause notice to blacklist, the appellant could have filed suitable reply for the same.Therefore, this Court is of the opinion that the show cause noticedated 10.04.2018 does not fulfil the requirements of valid showcause notice for blacklisting. In view of this Court, the order ofblacklisting the appellant clearly traversed beyond the bounds ofthe show cause notice which is impermissible in law. As result,the consequent blacklisting order dated 09.01.2019 cannot besustained. [Para 25][1189-D-F]

Erusian Equipment & Chemicals Ltd. v. State of WestBengal (1975) 1 SCC 70 : [1975] 2 SCR 674;Raghunath Thakur v. State of Bihar (1989) 1 SCC 229: [1988] 3 Suppl. SCR 867; Gorkha Security Services

Av. Government (NCT of Delhi) and Ors. (2014) 9 SCC105 : [2014] 13 SCR 617 – relied on.

Nasir Ahmad v. Assistant Custodian General, EvacueeProperty, Lucknow and Anr. (1980) 3 SCC 1 : [1980]3 SCR 248 – referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3687of 2020.

From the Judgment and Order dated 13.02.2019 of the High CourtDof Madhya Pradesh at Jabalpur in W.P. No. 2778 of 2019.

Gourab Banerji, Sr. Adv., Sahil Tagotra, Subhro Mukherjee, MohitPandey, Ms. Ishita Mishra, Ajit Pudussery, Advs. for the appearingparties.

The Judgment of the Court was delivered byE

S. ABDUL NAZEER, J.

1. Leave granted.

2. This appeal is directed against the order dated 13.02.2019 passedby the High Court of Madhya Pradesh at Jabalpur in Writ Petition No.F2778 of 2019. By the impugned order, the High Court has dismissed thewrit petition and has upheld the validity of the order dated 09.01.2019passed by respondent no.1, namely Food Corporation of India (for short‘the Corporation’) through its Deputy General Manager (Personnel),who is respondent no. 2 herein, to terminate contract of service withthe appellant and to blacklist the appellant from participating in any futureGtenders of the Corporation for period of 5 years.

3. The Corporation had issued Bid Document on 25.11.2016inviting bids for appointment of recruitment agency to conduct theprocess of recruitment for hiring watchmen for the Corporation’s office.The appellant submitted its bid on 21.12.2016 and was eventually declaredH

as the successful bidder vide the Corporation’s letter dated 28.03.2017.After completion of the formalities, the appellant was appointed for aperiod of 2 years w.e.f. 14.02.2017 for undertaking the tendered workof conducting recruitment of watchmen for the Corporation.

4. As part of its work, on 01.04.2018, the appellant conducted awritten exam for eligible aspirants for the post of watchman with theCorporation at various centres in Madhya Pradesh. On the same day, aSpecial Task Force of Bhopal Police arrested 50 persons in Gwalior,who were in possession of certain handwritten documents which primafacie appeared to be the question papers related to the examinationconducted by the appellant. The police filed charge sheet on 03.08.2018against certain persons. Upon receipt of the above information, theCorporation issued show cause notice dated 10.04.2018 to the appellantinforming the appellant about the said arrest and seizure of documentswhich appeared to contain question papers related to the examinationconducted by the appellant. This notice alleged that the appellant hadbreached various clauses of the Bid Document dated 25.11.2016 on theground that it was the sole responsibility of the appellant to prepare anddistribute the question papers as well as conduct the examination in ahighly confidential manner. Several clauses of the Bid Document werelisted in the said notice dated 10.04.2018 and the Corporation allegedthat the appellant had violated the same due to its abject failure andclear negligence in ensuring smooth conduct of the examination. Thesaid notice directed the appellant to furnish an explanation within 15days, failing which an appropriate ex-parte decision would be taken bythe Corporation.

5. The appellant replied to the aforesaid notice vide its letter dated12.04.2018 denying any negligence or leak of question papers from itsend. In its communication, the appellant furnished several factualjustifications in support of its position and also requested the Corporationto make the documents seized by the police available to the appellant forforensic analysis. These documents were provided to the appellant videthe Corporation’s letter dated 18.10.2018. The Corporation addressedanother letter dated 22.10.2018 calling upon the appellant to submit itsfinal reply/explanation. Thereafter, on 27.10.2018, the appellant submittedan Observation Report-cum-Reply/Explanation which compared theseized documents with the original question papers and contended thatthere were many dissimilarities between the two and thus there hadbeen no leakage or dissemination of the original question papers.

A6. By its aforesaid order dated 09.01.2019, the Corporationconcluded that the shortcomings/negligence on part of the appellant stoodestablished beyond any reasonable doubt and proceeded to terminate itscontract with the appellant and also blacklisted the appellant fromparticipating in any future tenders of the corporation for period of 5years. Further, the appellant’s security deposit with the Corporation wasBforfeited and the appellant was directed to execute the unexpired portionof the contract at its own cost and risk.

7. Aggrieved by the above order of the Corporation, the appellant,after issuing legal notice, filed Writ Petition No. 2778 of 2019 beforethe High Court. This petition came to be dismissed by the High Court’sCaforesaid order dated 13.02.2019 which is under challenge before us.

8. At the outset, it may be noted that Shri Gourab Banerji, learnedsenior counsel for the appellant, has submitted that the appellant onlyseeks to contest the issue of blacklisting and not the termination of thecontract between the appellant and the Corporation. Thus, the sole issueDthat falls for determination before us is whether the Corporation wasentitled to and justified in blacklisting the appellant for 5 years fromparticipating in its future tenders.

9. Before delving into the contentions of the parties, it would beuseful to extract some of the provisions of the Corporation’s BidEDocument dated 25.11.2016 which would be material to determining thevalidity of the blacklisting order dated 09.01.2019:

“INSTRUCTIONS TO BIDDERS

XXXXXX

XXX

F10. DISQUALIFICATION CONDITIONS: Bidder who havebeen blacklisted or otherwise debarred by FCI or central/state Govt. or any central/ State PSU / Statutory Corporations,will be ineligible during the period of such blacklisting.

10.1 Any Bidder whose contract with FCI or central/stateGGovt. or any central/State PSU/Statutory Corporations hasbeen terminated before the expiry of the contract period forbreach of any terms and conditions at any point of time duringthe last five years, shall be ineligible.

10.2 Bidder whose Earnest Money Deposit and/or SecurityHDeposit have been forfeited by the FCI or central/state Govt.

or any central/State PSU/Statutory Corporations, during thelast five years, for breach of any terms and conditions, shallbe ineligible.

XXXXXXXXX

25. CORRUPT PRACTICES:

25.4 Any corrupt practice indulged by the agency or any ofits employee at any of the stages of the recruitment includingpreparation of the question paper, distribution of questionpaper, conducting of the exams, valuation of the answersheets, declaration of results etc. shall lead to immediatecancellation of the contact and the agency shall be liable forappropriate legal action without prejudice to any other clausein the contract.

XXXXXXXXX

42. TERMINATION OF CONTRACT:

42.1 By Corporation

(ii) The FCI shall also have, without prejudice to other rightsand remedies, the right in the event of breach by the Bidderof any of the terms and conditions of the contract, or failingto observe any of the provisions, obligations governing thecontract, to terminate the contract forthwith and to get thework done for the unexpired period of the contract at therisk and cost of the Agency and to forfeit the Security Depositor any part thereof for recovery of all losses, damages, costsand expenses which may be incurred by FCI consequent tosuch termination and / or in completing the assignment. FCImay also effect recovery from other sums then due to theAgency or which at any time thereafter may become due underthis or any other contract with FCI. In case the sum is notsufficient to cover the full amounts recoverable, the Agencyshall pay FCI on demand the entire remaining balance due.(iii) FCI may at any time without assigning any reasonterminate the contract without any liability by giving 7 workingdays’ notice to the bidder.”

A10. On behalf of the appellant, it was submitted by Shri Banerjithat the Corporation had no power under the above quoted or any otherprovisions of the Bid Document dated 25.11.2016 to blacklist the appellant.It was argued that above quoted Clause 10 titled “DisqualificationsConditions”, which has been relied upon by the Corporation, merely laysdown eligibility criteria and does not grant any power of future blacklisting.BIt was further alleged that the said clause was also not mentioned in theshow cause notice dated 10.04.2018 issued by the Corporation. Thesaid show cause notice was also impinged upon by the appellant bysubmitting that it failed to meet the requirements of natural justice as itneither mentioned the grounds necessitating action nor specified whatCactions were proposed to be taken. Thus, Shri Banerji submitted that inthe absence of valid show cause notice, the consequent blacklistingorder cannot be sustained. He further highlighted the outsized impact ofthe Corporation’s impugned order on the appellant in as much as theCorporation’s branches in other States as well as other governmentcorporations have now issued as many as 5 notices to the appellant toDcancel contracts or prevent the appellant from participating in their tenderprocess and have also forfeited or withheld outstanding payments andsecurity deposits. He argued that due to the domino effect of theCorporation’s blacklisting of the appellant, the appellant has unreasonablysuffered 5 punishments at the hands of the Corporation which isEdisproportionate and tantamounts to the civil death of the appellant.

11. On the other hand, Shri Ajit Pudussery, the learned counselappearing on behalf of the Corporation argued that due to the negligenceof the appellant, the entire recruitment process had to be scrapped andthe same has deprived several applicants of employment and underminedFthe confidence of the public in the recruitment process of the Corporation.In relation to the issue of blacklisting, he submitted that since the appellanthad breached the terms of the contract by leaking the question papersfor the examination, it was not in public interest to permit it to participatein future tenders. He further submitted that the appellant must have

been aware of the possibility of the punishment of blacklisting as theGsame was provided for in the Bid Document. Thus, it was argued thatsince the blacklisting order was made as per the Bid Document andafter issuance of show cause notice, to which the appellant was grantedample time to reply to, the Corporation’s impugned blacklisting orderdated 09.01.2019 cannot be challenged.H

12. We have given our anxious consideration to the submissionsmade by the learned counsel at the Bar on behalf of the parties. In ouropinion, the validity of the impugned order of the Corporation dated09.01.2019, so far as the blacklisting of the appellant thereunder isconcerned, would in turn be determined by the validity of the underlyingshow cause notice dated 10.04.2018 issued by the Corporation to theappellant.

13. At the outset, it must be noted that it is the first principle ofcivilised jurisprudence that person against whom any action is soughtto be taken or whose right or interests are being affected should begiven reasonable opportunity to defend himself. The basic principle ofnatural justice is that before adjudication starts, the authority concernedshould give to the affected party notice of the case against him so thathe can defend himself. Such notice should be adequate and the groundsnecessitating action and the penalty/action proposed should be mentionedspecifically and unambiguously. An order travelling beyond the boundsof notice is impermissible and without jurisdiction to that extent. ThisCourt in Nasir Ahmad v. Assistant Custodian General, EvacueeProperty, Lucknow and Anr.,[1] has held that it is essential for the noticeto specify the particular grounds on the basis of which an action isproposed to be taken so as to enable the noticee to answer the caseagainst him. If these conditions are not satisfied, the person cannot besaid to have been granted any reasonable opportunity of being heard.

14. Specifically, in the context of blacklisting of person or anentity by the state or state corporation, the requirement of valid,particularized and unambiguous show cause notice is particularly crucialdue to the severe consequences of blacklisting and the stigmatizationthat accrues to the person/entity being blacklisted. Here, it may be gainfulto describe the concept of blacklisting and the graveness of theconsequences occasioned by it. Blacklisting has the effect of denying aperson or an entity the privileged opportunity of entering into governmentcontracts. This privilege arises because it is the State who is thecounterparty in government contracts and as such, every eligible personis to be afforded an equal opportunity to participate in such contracts,without arbitrariness and discrimination. Not only does blacklisting takesaway this privilege, it also tarnishes the blacklisted person’s reputationand brings the person’s character into question. Blacklisting also has

Along-lasting civil consequences for the future business prospects of theblacklisted person.

15. In the present case as well, the appellant has submitted thatserious prejudice has been caused to it due to the Corporation’s order ofblacklisting as several other government corporations have nowBterminated their contracts with the appellant and/or prevented theappellant from participating in future tenders even though the impugnedblacklisting order was, in fact, limited to the Corporation’s MadhyaPradesh regional office. This domino effect, which can effectively leadto the civil death of person, shows that the consequences of blacklistingtravel far beyond the dealings of the blacklisted person with one particularCgovernment corporation and in view thereof, this Court has consistentlyprescribed strict adherence to principles of natural justice whenever anentity is sought to be blacklisted.

16. The severity of the effects of blacklisting and the resultantneed for strict observance of the principles of natural justice beforeDpassing an order of blacklisting were highlighted by this Court in ErusianEquipment & Chemicals Ltd. v. State of West Bengal[2] in the followingterms:

“12. … The order of blacklisting has the effect of depriving aperson of equality of opportunity in the matter of publicEcontract. person who is on the approved list is unable toenter into advantageous relations with the Governmentbecause of the order of blacklisting. person who has beendealing with the Government in the matter of sale andpurchase of materials has legitimate interest or expectation.FWhen the State acts to the prejudice of person it has to besupported by legality.

XXXXXXXXX

15. … The blacklisting order involves civil consequences. Itcasts slur. It creates barrier between the personsGblacklisted and the Government in the matter of transactions.The black lists are instruments of coercion.

XXXXXXXXX

H2 (1975) 1 SCC 70.

20. Blacklisting has the effect of preventing person fromthe privilege and advantage of entering into lawfulrelationship with the Government for purposes of gains. Thefact that disability is created by the order of blacklistingindicates that the relevant authority is to have an objectivesatisfaction. Fundamentals of fair play require that the personconcerned should be given an opportunity to represent hiscase before he is put on the blacklist.”

17. Similarly, this Court in Raghunath Thakur v. State of Bihar,[3]struck down an order of blacklisting for future contracts on the groundof non-observance of the principles of natural justice. The relevant extractof the judgement in that case is as follows:

“4. … [I]t is an implied principle of the rule of law that anyorder having civil consequences should be passed only afterfollowing the principles of natural justice. It has to be realisedthat blacklisting any person in respect of business ventureshas civil consequence for the future business of the personconcerned in any event. Even if the rules do not express so, itis an elementary principle of natural justice that partiesaffected by any order should have right of being heard andmaking representations against the order.”

18. This Court in Gorkha Security Services v. Government (NCTof Delhi) and Ors.[4] has described blacklisting as being equivalent to thecivil death of person because blacklisting is stigmatic in nature anddebars person from participating in government tenders therebyprecluding him from the award of government contracts. It has beenheld thus:

“16. It is common case of the parties that the blacklistinghas to be preceded by show-cause notice. Law in this regardis firmly grounded and does not even demand muchamplification. The necessity of compliance with the principlesof natural justice by giving the opportunity to the personagainst whom action of blacklisting is sought to be taken hasa valid and solid rationale behind it. With blacklisting, manycivil and/or evil consequences follow. It is described as “civil

3 (1989) 1 SCC 229.

4 (2014) 9 SCC 105.

Adeath” of person who is foisted with the order of blacklisting.Such an order is stigmatic in nature and debars such personfrom participating in government tenders which meansprecluding him from the award of government contracts.”

19. In light of the above decisions, it is clear that prior showBcause notice granting reasonable opportunity of being heard is anessential element of all administrative decision-making and particularly

so in decisions pertaining to blacklisting which entail grave consequencesfor the entity being blacklisted. In these cases, furnishing of valid showcause notice is critical and failure to do so would be fatal to any orderof blacklisting pursuant thereto.C

20. In the present case, the factum of service of the show causenotice dated 10.04.2018 by the Corporation upon the appellant is not indispute. Rather, what Shri Banerji has argued on behalf of the appellantis that the contents of the said show cause notice were not such that theappellant could have anticipated that an order of blacklisting was beingDcontemplated by the Corporation. Gorkha Security Services (supra) isa case where this Court had to decide whether the action of blacklistingcould have been taken without specifically proposing/contemplating suchan action in the show-cause notice. For this purpose, this Court laiddown the below guidelines as to the contents of show cause noticeEpursuant to which adverse action such as blacklisting may be adopted:

“Contents of the show-cause notice

21. The central issue, however, pertains to the requirement ofstating the action which is proposed to be taken. Thefundamental purpose behind the serving of show-cause noticeFis to make the noticee understand the precise case set upagainst him which he has to meet. This would require thestatement of imputations detailing out the alleged breachesand defaults he has committed, so that he gets an opportunityto rebut the same. Another requirement, according to us, isGthe nature of action which is proposed to be taken for such abreach. That should also be stated so that the noticee is ableto point out that proposed action is not warranted in the givencase, even if the defaults/breaches complained of are notsatisfactorily explained. When it comes to blacklisting, thisrequirement becomes all the more imperative, having regardHto 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 thegrounds on which the action is proposed against him. Nodoubt, the High Court is justified to this agent, However, it isequally important to mention as to what would be theconsequence if the noticee does not satisfactorily meet thegrounds on which an action is proposed. To put it otherwise,we are of the opinion that in order fulfil the requirements ofprinciples of natural justice, show-cause notice should meetthe following two requirements viz:

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

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

We may hasten to add that even if it is not specificallymentioned in the show-cause notice but it can clearly andsafely be discerned from the reading thereof, that would besufficient to meet this requirement.”

21. Thus, from the above discussion, clear legal position emergesthat for show cause notice to constitute the valid basis of blacklistingorder, such notice must spell out clearly, or its contents be such that itcan be clearly inferred therefrom, that there is intention on the part ofthe issuer of the notice to blacklist the noticee. Such clear notice isessential for ensuring that the person against whom the penalty ofblacklisting is intended to be imposed, has an adequate, informed andmeaningful opportunity to show cause against his possible blacklisting.

22. To test whether the above stipulations as to the contents ofthe show cause have been satisfied in the present case, it may be usefulto extract the relevant portion of the said show cause notice dated10.04.2018 wherein the Corporation specified the actions that it mightadopt against the appellant:

“Whereas, the above cited clauses are only indicative & notexhaustive.

Whereas, it is quite evident from the sequence of events thatM/s U.MC Technologies Pvt. Ltd, Kolkata has violated the

Acondition/clauses governing the contract due to its abjectfailure & clear negligence in ensuring smooth conduct ofexamination. As it was the sole responsibility of the agency tokeep the process of preparation & distribution of questionpaper and conducting of exam in highly confidential manner,the apparent leak point towards, acts of omission &Bcommission on the part of M/S UMC Technologies Ltd.Kolkata.

Whereas, M/S UMC Technologies Pvt. Ltd. Kolkata is herebyprovided an opportunity to explain its Position in the matterbefore suitable decision is taken as per T&C of MTF. TheCexplanation if any should reach this office within period of15 days of receipt of this notice falling which appropriatedecision shall be taken. ex-parte as per terms and conditionsmentioned in MTF without prejudice to any other legal rights& remedies available with the corporation.”D23. It is also necessary to highlight the order dated 09.01.2019passed by the Corporation in pursuant to the aforesaid notice, the operativeportion of which reads as under:

“After having examined the entire matter in detail, theshortcomings/negligence on the part of M/s UMCETechnologies Pvt. Ltd. stands established beyond anyreasonable doubt. Now, therefore in accordance with clause42.1(II) of the governing MTF, the competent authority herebyterminates the contract at the risk and cost of the Agency. Asper Clause No. 10.1 & 10.2 the said M/s UMC TechnologiesFPvt. Ltd. is hereby debarred from participating in any futuretenders of the corporation for period of Five years. Further,the Security Deposit too stands forfeited as per clause 15.6of MTF. This order is issued without prejudice to any otherlegal remedy available with FCI to safeguard its interest.”

G24. plain reading of the notice makes it clear that the action ofblacklisting was neither expressly proposed nor could it have been inferredfrom the language employed by the Corporation in its show cause notice.After listing 12 clauses of the “Instruction to Bidders”, which were partof the Corporation’s Bid Document dated 25.11.2016, the notice merelycontains vague statement that in light of the alleged leakage of questionHpapers by the appellant, an appropriate decision will be taken by the

Corporation. In fact, Clause 10 of the same Instruction to Bidders sectionof the Bid Document, which the Corporation has argued to be the sourceof its power to blacklist the appellant, is not even mentioned in the showcause notice. While the notice clarified that the 12 clauses specified inthe notice were only indicative and not exhaustive, there was nothing inthe notice which could have given the appellant the impression that theaction of blacklisting was being proposed. This is especially true sincethe appellant was under the belief that the Corporation was not evenempowered to take such an action against it and since the only clausewhich mentioned blacklisting was not referred to by the Corporation inits show cause notice. While the following paragraphs deal with whetheror not the appellant’s said belief was well-founded, there can be noquestion that it was incumbent on the part of the Corporation to clarify inthe show cause notice that it intended to blacklist the appellant, so as toprovide adequate and meaningful opportunity to the appellant to showcause against the same.25. The mere existence of clause in the Bid Document, whichmentions blacklisting as bar against eligibility, cannot satisfy themandatory requirement of clear mention of the proposed action in theshow cause notice. The Corporation’s notice is completely silent aboutblacklisting and as such, it could not have led the appellant to infer thatsuch an action could be taken by the Corporation in pursuance of thisnotice. Had the Corporation expressed its mind in the show cause noticeto black list, the appellant could have filed suitable reply for the same.Therefore, we are of the opinion that the show cause notice dated10.04.2018 does not fulfil the requirements of valid show cause noticefor blacklisting. In our view, the order of blacklisting the appellant clearlytraversed beyond the bounds of the show cause notice which isimpermissible in law. As result, the consequent blacklisting order dated09.01.2019 cannot be sustained.

26. In view of our conclusion that the blacklisting order dated09.01.2019 passed by the Corporation is contrary to the principles ofnatural justice, it is unnecessary for us to consider the other contentionsof the learned counsel for the appellant. Having regard to the peculiarfacts and circumstances of the present case, we deem it appropriate notto remit the matter to the Corporation for fresh consideration.

27. For the foregoing reasons, the appeal succeeds and it isaccordingly allowed. The order dated 13.02.2019 passed by the High

ACourt is set aside. The Corporation’s order dated 09.01.2019 is herebyquashed only so far as it blacklists the appellant from participating infuture tenders. The parties will bear their own costs.

28. Pending application(s), if any, shall stand disposed of.

Ankit Gyan

Appeal allowed.