The High Court of Delhi recently, found that the principles of natural justice require that a person against whom an action is taken or whose rights are affected should be given a reasonable opportunity to defend themselves. It emphasized the importance of a valid, specific, and unambiguous show-cause notice, particularly in cases of blacklisting, due to the severe consequences and stigmatization that come with it. Blacklisting not only denies a person or entity the opportunity to enter into government contracts but also tarnishes their reputation and has long-lasting civil consequences. The bench consisting of Justice Subramonium Prasad held that the mere existence of a clause mentioning blacklisting in a bid document does not satisfy the requirement of a clear mention of the proposed action in the show-cause notice.
Brief Facts:
The High Court considered a writ petition against an order terminating a contract agreement between CGHS and M/s Goel Medicos for supplying medicines to CGHS Wellness Centres. The petitioner, Goel Medicos, participated in a tender and was declared a successful bidder. However, the respondents alleged fraudulent acts due to a change in proprietorship and the use of a power of attorney. The petitioner's explanation was rejected, leading to the termination of the contract, forfeiture of the performance security, and a two-year ban on participating in CGHS tenders/contracts. The writ petition seeks to challenge and overturn this order.
Contentions of the Appellant:
The appellant's contention, presented by Mr. Vivek Sood, focused on the portion of the impugned order that debarred the petitioner from participating in CGHS tenders/contracts for two years. It is argued that the show cause notices only mentioned the termination of the contract and forfeiture of the performance security, without any mention of debarment. Thus, the debarment order was deemed unsustainable due to the lack of notice. Reference is made to the principle of natural justice, as established in the UMC Technologies case, which emphasized the need for adequate notice and clear grounds for proposed actions or penalties.
Contentions of the Respondent:
The respondent, represented by Mr. Chetan Sharma, countered by pointing out Clause 15 of the tender document, which addresses corrupt or fraudulent practices, and Clause 16, which covers the forfeiture of EMD/Performance Security. It is argued that Clause 16(b) allows for debarment and forfeiture if factual information is suppressed during the bidding process. The respondent draws attention to a Show Cause Notice highlighting additional infractions committed by the petitioner. Mr. H. S. Phoolka, representing other parties, supported the respondent's position and argued against interference with the debarment order, claiming that the petitioner is guilty of other malpractices, and any intervention would negatively impact the tender process.
Observations by the Court:
The court observed that the undisputed facts of the case were that the petitioner, as per a gift deed, became the sole proprietor of M/s Goel Medicos. Despite this transfer of proprietorship, the previous proprietor, Mrs. Usha Goel, executed a power of attorney allowing Mr. Akash Jain to sign tender documents on behalf of M/s Goel Medicos. Based on this power of attorney, Mr. Jain signed and submitted the tender documents. The court found that the tender documents, signed by a person authorized by a former proprietor who had ceased to be the sole proprietor, should not have been considered by CGHS in the tender process.
The court held that while the termination of the contract and forfeiture of the performance security was justified, the debarment of the petitioner from participating in any CGHS tenders/contracts for two years was not justified. The show cause notice did not specifically mention the debarment as a proposed action, which was necessary for natural justice. Referring to the UMC Technologies case, the court emphasized the need for a clear mention of proposed actions in show-cause notices, especially in cases of blacklisting or debarment. Therefore, the court set aside the debarment portion of the impugned order.
The decision of the Court:
The court clarified that it did not make any observations on the other allegations against the petitioner, and the respondents were free to take appropriate action by issuing a fresh show cause notice. The writ petition was partly allowed and disposed of.
Case Name: Basant Goel Vs Union Of India & Ors.
Coram: Hon'ble Mr. Justice Subramonium Prasad
Case No.: W.P.(C) 8491/2023, CM APPLs. 32351-52/2023 & 32608/2023
Advocates of the Petitioners: Mr. Vivek Sood, Sr. Advocate with Mr. Rupesh Tyagi, Mr. Saurabh Aggarwal, Advocates
Advocates of the Respondent: Mr. Chetan Sharma, ASG with Ms. Arunima Dwivedi, Mr. Amit Gupta, Mr. Saurabh Tripathi, Mr. Vikram Aditya Singh, Ms. Pinky Pawar, Mr. Aakash Pathak, Advocates for UoI Mr. H. S. Phoolka, Sr. Advocate with Mr. Vinay Kumar Dubey, Mr. Prateek Tiwari, Ms. Priya Dubey, Ms. Surpreet Kaur, Mr. Mandeep Singh, Advocates for Intervenors – M/s Kaushik Medical Store & M/s Gandhi Medicos Mr. Abhinav Agnihotri, Mr. Divesh Sawhney, Advocates for Intervenor – Prakash Medicos. Ms. Ritu Bhalla, Mr. Siddharth Das, Mr. Jasvinder Sharma, Advocates for Applicant.
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