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Saturday, August 9, 2014

Sec.5 of Limitation Act - Sec.19 Of Revision powers of High court - Apex court held that we are of the opinion that the case of Nagar Palika Parishad, Morena (supra) was decided erroneously. Section 5 of the Limitation Act is applicable to Section 19 of the Act of 1983 =CIVIL APPEAL NO.3498 OF 2008 STATE OF M.P. & ANR. ……APPELLANTS Vs. ANSHUMAN SHUKLA ……RESPONDENT = 2014 Aug. Part - http://judis.nic.in/supremecourt/filename=41818

Sec.5 of Limitation Act - Sec.19 Of Revision powers of High court - Apex court held that we are of the opinion that the case of Nagar Palika Parishad, Morena (supra) was decided erroneously. Section 5 of the Limitation Act is applicable to Section 19 of the Act of 1983 =

“Whether Provision of Section 5 of the
Limitation Act is applicable to revision
filed under Section 19 in the High
Court?”
“19. High Court’s power of revision –
(1)-
The High Court may suo motu at any time
or on an application made to it within
three months of the award by an aggrieved
party, call for the record of any case in
which an award has been made under this
Act by issuing a requisition to the
Tribunal, and upon receipt of such
requisition the Tribunal shall send or
cause to be sent to that Court the
concerned award and record thereof.
(2) If it appears to the High Court
that the Tribunal –
(a) has exercised a jurisdiction
not vested in it by law; or
(b) has failed to exercise a
jurisdiction so vested; or
(c) has acted in exercise of its
jurisdiction illegally, or
with material irregularity;
or
(d) has misconducted itself or
the proceedings; or
(e) has made an award which is
invalid or has been
improperly procured by any
party to the proceedings,
the High Court may make such order in the
case as it thinks fit.
(3) The High Court shall in deciding
any revision under this sectionPage 8
8
exercise the same powers and
follow the same procedure as far
as may be, as it does in deciding
a revision under Section 115 of
the Code of Civil Procedure,
1908(No.5 of 1908).
(4) The High Court shall cause a copy
of its order in revision to be
certified to the Tribunal.
Explanation.-For the purposes of this
section, an award shall include an
“interim” award.”
Section 5 of the Limitation Act
provides that an
appeal may be admitted after the limitation period has
expired, if the appellant satisfies the court that
there was sufficient cause for delay.
26. Section 29 of the Limitation Act is the saving
section. Sub-section (2) reads as follows:
Page 14
14
“(2) Where any special or local law
prescribes for any suit, appeal or
application a period of limitation
different from the period prescribed by
the Schedule, the provisions of section 3
shall apply as if such period were the
period prescribed by the Schedule and for
the purpose of determining any period of
limitation prescribed for any suit,
appeal or application by any special or
local law, the provisions contained in
sections 4 to 24 (inclusive) shall apply
only in so far as, and to the extent to
which, they are not expressly excluded by
such special or local law.”
Sub section (2) thus, provides that Sections 4 to 24 of
the Limitation Act shall be applicable to any Act which
prescribes a special period of limitation, unless they
are expressly excluded by that special law.
Section 19 of the Act of 1983, does not contain any
express rider on the power of the High Court toPage 23
23
entertain an application for revision after the expiry
of the prescribed period of three months. On the
contrary, the High Court is conferred with suo moto
power, to call for the record of an award at any time.
It cannot, therefore, be said that the legislative
intent was to exclude the applicability of Section 5 of
the Limitation Act to Section 19 of the Act of 1983.
38. In our opinion, it is unnecessary to delve into the
question of whether the Arbitral Tribunal constituted
under the Act is a Court or not for answering the issue
in the present case, as the delay in filing the
revision has occurred before the High Court, and not
the Arbitral Tribunal.
Answer to Point No.2
39. In light of the reasons recorded above, we are of
the opinion that the case of Nagar Palika Parishad,
Morena (supra) was decided erroneously. Section 5 of
the Limitation Act is applicable to Section 19 of the
Act of 1983. No express exclusion has been incorporatedPage 24
24
therein, and there is neither any evidence to suggest
that the legislative intent was to bar the application
of Section 5 of the Limitation Act on Section 19 of the
Act of 1983. The cases which were relied upon to
dismiss the Special Leave Petition, namely Nasiruddin
(supra) and Popular Construction (supra) can be
distinguished both in terms of the facts as well as the
law applicable, and thus, have no bearing on the facts
of the present case.
40. For the reasons stated supra, we answer the points
framed by us in the affirmative in favour of the
appellants. The impugned judgments and orders are set
aside and both the appeals are allowed. The delay in
filing revision petitions is condoned and the cases are
remanded to the High Court to examine the same on
merits. We request the High Court to dispose of the
cases as expeditiously as possible.
2014 Aug. Part - http://judis.nic.in/supremecourt/filename=41818
T.S. THAKUR, V. GOPALA GOWDA, C. NAGAPPAN
Page 1
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.3498 OF 2008
STATE OF M.P. & ANR. ……APPELLANTS
Vs.
ANSHUMAN SHUKLA ……RESPONDENT
WITH
CIVIL APPEAL NO. 1145 OF 2009
J U D G M E N T
V.GOPALA GOWDA, J.
Civil Appeal No.3498 of 2008 arises out of order
dated 30.6.2005 in C.R.No.1330 of 2003 passed by thePage 2
2
Division Bench of the Madhya Pradesh High Court at
Jabalpur relying on the judgment and order dated
13.4.2005 passed by the Full Bench of the Madhya
Pradesh High Court in C.R.No.633 of 2003 etc. The
connected Civil Appeal No.1145 of 2009 arises out of
judgment and order dated 4.7.2006 passed by the
Division Bench of the Madhya Pradesh High Court at
Jabalpur in C.R.No.1 of 2006.
2. Civil Appeal No.3498 of 2008 was heard by a
Division Bench of this Court, wherein by way of
judgment dated 12.05.2008, it was opined that the case
of Nagar Palika Parishad, Morena v. Agrawal
Construction Company1 was not correctly decided and,
thus, the matter required consideration by a larger
bench. It was further opined that the record of the
case be placed before the Hon’ble the Chief Justice of
India for constituting an appropriate Bench. That is
1
2004 (II) MPJR SN 55Page 3
3
how this matter has come up for consideration before
us.
3. As both the appeals are identical, for the sake of
convenience, we would refer to the necessary facts of
C.A.No.3498 of 2008 which are stated hereunder:
The respondent filed a petition under Section 7 of
the Madhya Pradesh Madhyastham Adhikaran Adhiniyam,
1983 (hereinafter referred to as “the Act of 1983”)
raising certain claims about the works contract
executed between the parties. The petition was partly
allowed by the Madhya Pradesh Arbitration Tribunal vide
its award dated 18.6.2003. An amount of Rs.6,05,624/-
with interest @12% per annum was awarded from
24.04.1998 till the date of realisation.
4. Being aggrieved, the appellants filed a Civil
Revision No.1330 of 2003 before the High Court of
Madhya Pradesh under Section 19 of the Act of 1983,
along with an application under Section 5 of thePage 4
4
Limitation Act, 1963 (hereinafter referred to as the
“Limitation Act”) to condone the delay in filing the
revision.
5. The High Court observed in its order dated
07.05.2004 in the Revision that the view expressed by
the Division Bench of the High Court in Nagar Palika
Parishad, Morena v. Agrawal Construction Company2
required consideration by a larger Bench on the
question of:
“Whether Provision of Section 5 of the
Limitation Act is applicable to revision
filed under Section 19 in the High
Court?”
6. After the reference was made, the matter in
Nagarpalika Parishad, Morena (supra) came up for
consideration before a division bench of this Court.
While dismissing the petition at the threshold, it was
observed in an order dated 27.08.20043:
2
2004 MLJ 374
3Page 5
5
“……In our view there is no infirmity in
the impugned judgment. The authority in
the case of Nasiruddin and Ors. v. Sita
Ram Agarwal (2003) 2 SCC 577 has been
correctly followed. Same view has also
been taken by this Court in the case of
Union of India v. Popular Construction
Co. (2001) 8 SCC 470.
The Special Leave Petition stands
dismissed with no order as to costs.”
7. The full bench of the High Court in the order dated
13.04.2005, held that the dismissal of a special leave
petition at the threshold stage by the Supreme Court is
a binding precedent, and must be followed by the courts
below. It was however also observed that no specific
time limit can be fixed for exercising the suo motu
revisional power under Section 19 of the Act of 1983.
It was further held that the power has to be exercised
within reasonable time which depends upon the nature of
the order to be revised and other facts and
circumstances of the case. The full bench of the High
Court directed to place the revision petition before
2004(II) MPJR SN 374Page 6
6
the appropriate bench for consideration in accordance
with law.
8. The Civil Revision No. 1330 of 2003 which was
barred by time of 80 days was dismissed by the High
Court for the reasons given by the Full Bench in its
order dated 13.04.2005.
9. Being aggrieved by the order of the High Court, the
appellants filed a special leave petition before this
Court against the dismissal of revision. The Division
Bench of this court vide order dated 12.05.2008 was of
the opinion that the case of Nagar Palika Parishad,
Morena (supra) had been incorrectly dismissed at the
threshold and that the same requires consideration by a
larger Bench and further directed that the records of
the case be placed before the Hon’ble the Chief Justice
of India for constituting an appropriate Bench. Thus,
the matter came before us for consideration.
10. First of all, in order to appreciate rival legal
submissions, it would be necessary to consider SectionPage 7
7
19 of the Act of 1983, which relates to revision and
its limitation, which reads as under :-
“19. High Court’s power of revision –(1)-
The High Court may suo motu at any time
or on an application made to it within
three months of the award by an aggrieved
party, call for the record of any case in
which an award has been made under this
Act by issuing a requisition to the
Tribunal, and upon receipt of such
requisition the Tribunal shall send or
cause to be sent to that Court the
concerned award and record thereof.
(2) If it appears to the High Court
that the Tribunal –
(a) has exercised a jurisdiction
not vested in it by law; or
(b) has failed to exercise a
jurisdiction so vested; or
(c) has acted in exercise of its
jurisdiction illegally, or
with material irregularity;
or
(d) has misconducted itself or
the proceedings; or
(e) has made an award which is
invalid or has been
improperly procured by any
party to the proceedings,
the High Court may make such order in the
case as it thinks fit.
(3) The High Court shall in deciding
any revision under this sectionPage 8
8
exercise the same powers and
follow the same procedure as far
as may be, as it does in deciding
a revision under Section 115 of
the Code of Civil Procedure,
1908(No.5 of 1908).
(4) The High Court shall cause a copy
of its order in revision to be
certified to the Tribunal.
Explanation.-For the purposes of this
section, an award shall include an
“interim” award.”
11. Following submissions were made by the learned
counsel for the parties in support of their claim.
12. Learned counsel on behalf of the appellants
contended that the High Court failed to consider that
the revision petition has been preferred under Section
19 of the Act of 1983 and the delay of 80 days should
have been condoned by it.
13. It was further contended by the learned counsel on
behalf of the appellants that the High Court should
have considered that provision of Section 5 of the
Limitation Act, would be applicable while entertaining
a revision petition under Section 19 of the Act ofPage 9
9
1983. There was also failure on the part of the High
Court for having not exercised the suo motu revisionary
powers under the Act in the circumstances of the case.
14. It was further contended that the judgments
referred in the Full Bench order before the High Court
are not applicable in the circumstance of the case.
15. Regarding Section 19 of the Act of 1983, it was
contended by the learned counsel that the proviso to
Section 19 was added only in the year 2005 though the
issue is concerned with the pre-amendment provision,
when such proviso, specifically conferring power to
condone delay was not there.
16. It was also contended that the question - whether
the Arbitral Tribunal constituted under the Act is a
“Court” or not, need not be decided as Section 19(3) of
the Act of 1983 provides that while exercising the
power of revision, the High Court will exercise the
same powers and will follow the same procedures as itPage 10
10
does in deciding a revision under Section 115 of the
Civil Procedure Code.
17. It was further contended by the learned counsel
appearing on behalf of the appellants that the order in
the case of Nagarpalika Parishad, Morena (supra) does
not lay down the correct legal position. The order was
passed sub-silentio and is per incurium as it neither
considers the aforesaid legal issues and submissions
nor does it take into account the relevant legal
provisions and the Scheme of the Act or various case
laws on the point. The judgments relied on by this
Court in the case of Nagarpalika Parishad, Morena
(supra) are not applicable to the issues arising here
and are distinguishable on facts.
18. On the other side, in the counter affidavit filed
by the respondents in the connected C.A. No. 1145 of
2009, it is stated that the appellants have been trying
to mislead this Hon’ble Court by stating that the
Application was preferred under Section 5 of the
Limitation Act. However, by a bare perusal of thePage 11
11
application for the condonation of delay, it can be
seen that the application was preferred under the
amended provisions of Section 19 of the Act. The
benefit of the amended Section 19 of the Act could not
be given to the appellants as the provisions were not
made with retrospective effect. The amendment came into
effect on 29.08.2005, much after the expiry period to
prefer an application under Section 19 of the Act. The
High Court has very rightly held that the Revision was
time barred. Since no such provision existed on the
date of filing of application for condonation of delay,
the appellants were not entitled to get the delay
condoned.
19. We have heard the learned counsel for the parties
and with reference to the above factual and rival legal
contentions urged on behalf of the parties the
following points would arise for our consideration:
1)Whether the provisions of Limitation Act are
applicable to the provisions of Madhya Pradesh
Madhyastham Adhikaran Adhiniyam, 1983?Page 12
12
2)What Order?
Answer to Point No.1
20. The Madhya Pradesh Madhyastham Adhikaran Adhiniyam,
1983 came into force with effect from 01.03.1985. It
was enacted to provide for the establishment of a
Tribunal to arbitrate on disputes to which the State
Government or a Public Undertaking (wholly or
substantially owned or controlled by the State
Government), is a party and for matters incidental
thereto or connected therewith.
21. The Arbitral Tribunal is constituted in terms of
Section 3 of the Act of 1983, for resolving all
disputes and differences pertaining to works contract
or arising out of or connected with execution,
discharge or satisfaction of any such works contract.
22. Section 7 of the Act provides for reference to
Tribunal. Such reference may be made irrespective of
whether the agreement contains an arbitration clause or
not. Section 7-A of the Act provides for thePage 13
13
particulars on the basis whereof the reference petition
is to be filed.
23. Section 19 of the Act confers the power of revision
on the High Court. It provides that the aggrieved party
may make an application for revision before the High
Court within three months of the date of the award.
This Section was amended in 2005, to confer the power
on the High Court to condone the delay. Since this
dispute pertains prior to 2005, thus, the provision of
the unamended Act shall apply in the present case.
24. The Limitation Act, 1963 is the general legislation
on the law of limitation.
25. Section 5 of the Limitation Act provides that an
appeal may be admitted after the limitation period has
expired, if the appellant satisfies the court that
there was sufficient cause for delay.
26. Section 29 of the Limitation Act is the saving
section. Sub-section (2) reads as follows: Page 14
14
“(2) Where any special or local law
prescribes for any suit, appeal or
application a period of limitation
different from the period prescribed by
the Schedule, the provisions of section 3
shall apply as if such period were the
period prescribed by the Schedule and for
the purpose of determining any period of
limitation prescribed for any suit,
appeal or application by any special or
local law, the provisions contained in
sections 4 to 24 (inclusive) shall apply
only in so far as, and to the extent to
which, they are not expressly excluded by
such special or local law.”
Sub section (2) thus, provides that Sections 4 to 24 of
the Limitation Act shall be applicable to any Act which
prescribes a special period of limitation, unless they
are expressly excluded by that special law.
27. This Court in the case of Mukri Gopalan v.
Cheppilat Puthanpuravil Aboobacker4 examined the
question of whether the Limitation Act will apply to
the Kerala Buildings (Lease and Rent) Control Act,
1965. While holding that the appellate authority under
4
(1995) 5 SCC 5Page 15
15
the Kerala Act acts as a Court, it was held that since
the Act prescribes a period of limitation, which is
different from the period of limitation prescribed
under the Limitation Act, and there is no express
exclusion of Sections 4 to 24 of the Limitation Act, in
the above (Lease & Rent) Control Act, thus, those
Sections shall be applicable to the Kerala Act.
While examining the provisions of Section 29(2) of
the Limitation Act, it was observed:
“8. A mere look at the aforesaid provision
shows for its applicability to the facts of
a given case and for importing the machinery of
the provisions containing Sections 4 to 24 of
the Limitation Act the following two
requirements have to be satisfied by the
authority invoking the said provision:
(i) There must be a provision for period of
limitation under any special or local law in
connection with any suit, appeal or
application.
(ii) The said prescription of period of
limitation under such special or local law
should be different from the period prescribed
by the schedule to the Limitation Act.”Page 16
16
28. It was further held that if the two above
conditions are satisfied, then the following
implications would follow:
“9. If the aforesaid two requirements are
satisfied the consequences contemplated by
Section 29(2) would automatically follow.
These consequences are as under:
(i) In such a case Section 3 of the
Limitation Act would apply as if the period
prescribed by the special or local law was
the period prescribed by the schedule.
(ii) For determining any period of limitation
prescribed by such special or local law for
a suit, appeal or application all the
provisions containing Sections 4 to
24(inclusive) would apply insofar as and to
the extent to which they are not expressly
excluded by such special or local law.”
[emphasis laid by this Court]
29. Further, in the case of Hukumdev Narain Yadav v.
Lalit Narain Mishra5, a three judge Bench of this
court, while examining whether the Limitation Act would
be applicable to the provisions of Representation of
People Act, observed as under:
5
(1974)2 SCC 133Page 17
17
“17. ....but what we have to see is whether
the scheme of the special law, that is in
this case the Act, and the nature of the
remedy provided therein are such that the
Legislature intended it to be a complete code
by itself which alone should govern the
several matters provided by it. If on an
examination of the relevant provisions it is
clear that the provisions of the Limitation
Act are necessarily excluded, then the
benefits conferred therein cannot be called
in aid to supplement the provisions of the
Act. In our view, even in a case where the
special law does not exclude the provisions
of Sections 4 to 24 of the Limitation Act by
an express reference, it would nonetheless be
open to the Court to examine whether and to
what extent the nature of those provisions or
the nature of the subject-matter and scheme
of the special law exclude their operation.”
30. According to Hukumdev Narain Yadav (supra), even if
there exists no express exclusion in the special law,
the court reserves the right to examine the provisions
of the special law, and arrived at a conclusion as to
whether the legislative intent was to exclude the
operation of the Limitation Act.
31. Section 19 of the Act of 1983 prescribes a period
of limitation of three months. This limitation periodPage 18
18
finds no mention in the schedule to the Limitation Act.
Further, Section 19 does not expressly exclude the
application of Sections 4 to 24 of the Limitation Act,
1963.
32. We now turn our attention to the case of Nasiruddin
and Ors. (supra), on which reliance was placed by this
court in the case of Nagarpalika Parishad, Morena
(supra), while dismissing the Special Leave Petition.
The issue in that case was whether the deposit of rent
under section 13(4) of the Rajasthan Premises (Control
of Rent and Eviction) Act, 1950 by a tenant is an
application for the purpose of Section 5 of the
Limitation Act.
33. While examining the nature of the deposit by
tenant, it was held:
“46. ...the deposit by the tenant within
15 days is not an application within the
meaning of Section 5 of the Limitation
Act, 1963. Since the deposit does not
require any application, therefore, the
provisions of Section 5 cannot be extended
where the default takes place in complyingPage 19
19
with an order under Sub-section (4) of
Section 13 of the Act.”
34. Further, explaining as to why Section 5 of the
Limitation Act is not applicable, the Court observed:
“The provisions of Section 5 of the
Limitation Act must be construed having
regard to Section 3 thereof. For filing an
application after the expiry of the period
prescribed under the Limitation Act or any
special statute a cause of action must
arise. Compliance of an order passed by a
Court of Law in terms of a statutory
provision does not give rise to a cause of
action. On failure to comply with an order
passed by a Court of Law instant
consequences are provided for under the
statute. The Court can condone the default
only when the statute confers such a power
on the Court and not otherwise. In that
view of the matter we have no other option
but to hold that Section 5 of the
Limitation Act, 1963 has no application in
the instant case.”
[emphasis laid by this Court]
It is evident on a plain reading of the judgment in
that case, that the reason why Section 5 of the
Limitation Act was said to be inapplicable to the
Rajasthan Act, Section 13(4), was because of the nature
of the specific provision in question. It was held thatPage 20
20
Section 5 of the Limitation Act is not applicable to
Section 13(4), as the deposit of rent by the tenant
cannot be said to be an application for the purpose of
Section 5 of the Limitation Act. This case cannot be
said to be relevant to the facts of the present case,
as Section 5 of the Limitation Act has got application
for the purpose of Section 19 of the Act of 1983, and
the cause of action accrued to the appellant when the
Tribunal passed the award.
35. We now direct our attention to the second case i.e.
Union of India v. Popular Construction (supra)on which
reliance was placed by this Court while dismissing the
Special Leave Petition in the case of Nagarpalika
Parishad, Morena (supra). The issue therein was
whether Sections 4 to 24 of the Limitation Act would
be applicable to Section 34 of the Arbitration Act,
1996.
36. The wording of Section 34(3) of the Arbitration
Act, 1996, reads thus:Page 21
21
“34. (3) An application for setting
aside may not be made after three
months have elapsed from the date on
which the party making that
application had received the arbitral
award or, if a request had been made
under section 33, from the date on
which that request had been disposed
of by the arbitral tribunal:
Provided that if the court is
satisfied that the applicant was
prevented by sufficient cause from
making the application within the said
period of three months it may
entertain the application within a
further period of thirty days, but not
thereafter."
[emphasis laid by this Court]
While examining the provision of Section 34, the Court
in Popular Construction case (supra) observed as
under:
“8. Had the proviso to Section 34
merely provided for a period
within which the Court could
exercise its discretion, that
would not have been sufficient to
exclude Sections 4 to 24 of the
Limitation Act because "mere
provision of a period of
limitation in howsoever
peremptory or imperative languagePage 22
22
is not sufficient to displace the
applicability of Section 5.”
[emphasis laid by this Court]
While holding that Section 5 is not applicable to
Section 34(3), it was held that the presence of the
words “but not thereafter” operate as an express
exclusion to Section 5 of the Limitation Act.
“12. As far as the language of
Section 34 of the 1996 Act is
concerned, the crucial words are
'but not thereafter' used in the
proviso to sub-section (3). In our
opinion, this phrase would amount
to an express exclusion within the
meaning of Section 29(2) of the
Limitation Act, and would
therefore bar the application of
section 5 of that Act. Parliament
did not need to go further. To
hold that the Court could
entertain an application to set
aside the Award beyond the
extended period under the proviso,
would render the phrase 'but not
thereafter' wholly otiose. No
principle of interpretation would
justify such a result.”
(Emphasis laid down by the Court)
37. Section 19 of the Act of 1983, does not contain any
express rider on the power of the High Court toPage 23
23
entertain an application for revision after the expiry
of the prescribed period of three months. On the
contrary, the High Court is conferred with suo moto
power, to call for the record of an award at any time.
It cannot, therefore, be said that the legislative
intent was to exclude the applicability of Section 5 of
the Limitation Act to Section 19 of the Act of 1983.
38. In our opinion, it is unnecessary to delve into the
question of whether the Arbitral Tribunal constituted
under the Act is a Court or not for answering the issue
in the present case, as the delay in filing the
revision has occurred before the High Court, and not
the Arbitral Tribunal.
Answer to Point No.2
39. In light of the reasons recorded above, we are of
the opinion that the case of Nagar Palika Parishad,
Morena (supra) was decided erroneously. Section 5 of
the Limitation Act is applicable to Section 19 of the
Act of 1983. No express exclusion has been incorporatedPage 24
24
therein, and there is neither any evidence to suggest
that the legislative intent was to bar the application
of Section 5 of the Limitation Act on Section 19 of the
Act of 1983. The cases which were relied upon to
dismiss the Special Leave Petition, namely Nasiruddin
(supra) and Popular Construction (supra) can be
distinguished both in terms of the facts as well as the
law applicable, and thus, have no bearing on the facts
of the present case.
40. For the reasons stated supra, we answer the points
framed by us in the affirmative in favour of the
appellants. The impugned judgments and orders are set
aside and both the appeals are allowed. The delay in
filing revision petitions is condoned and the cases are
remanded to the High Court to examine the same on
merits. We request the High Court to dispose of the
cases as expeditiously as possible.
………………………………………………………………………J.
Page 25
25
[T.S. THAKUR]
………………………………………………………………………J.
[V. GOPALA GOWDA]
………………………………………………………………………J.
[C. NAGAPPAN]
New Delhi,
August 6, 2014

Suit for Declaration , Mandatory Injunction and for accounts and permanent injunction against companies , firms and immovable properties of Hindu Joint family - Trial court granted interim injunction order for not to sale and directed to submit audit reports regularly before the court - High court dismissed the injunction order as the suit is not maintainable against company properties and firms( even though corporate veil was lifted in partition suits as per Apex court) and as the suit is bad for non-joinder of necessary parties and dismissed the I.A. stating that when the main relief can not be granted, no interim injunction should be given - Apex court held that we are of the opinion that while dealing with a matter relating to vacation of order of temporary injunction, it was not open for the High Court to give a finding on the main issue relating to maintainability of the suit and the family settlement reached between the parties. = CIVIL APPEAL NO. 7174 OF 2014 (Arising out of SLP(C) No.9914 of 2012) BABU LAL & ORS. … APPELLANTS VERSUS M/S VIJAY SOLVEX LTD. & ORS. … RESPONDENTS = 2014 -Aug.part – http://judis.nic.in/supremecourt/filename=41811

Suit for Declaration , Mandatory Injunction and for accounts and permanent injunction against companies , firms and immovable properties of Hindu Joint family - Trial court granted interim injunction order for not to sale and directed to submit audit reports regularly before the court - High court dismissed the injunction order as the suit is not maintainable against company properties and firms( even though corporate veil was lifted in partition suits as per Apex court) and as the suit is bad for non-joinder of necessary parties and dismissed the I.A. stating that when the main relief can not be granted, no interim injunction should be given - Apex court held that we are of the opinion that while dealing with a matter relating to vacation of order of temporary injunction, it was not open for the High Court to give a finding on the main issue relating to maintainability of the suit and the family settlement reached between the parties. =

Plaintiffs/appellants-Babulal and others filed a suit for
declaration, mandatory injunction, rendition of accounts and permanent
injunction against the defendants/non-applicants =
Interim Injunction
Resultantly, the application of the plaintiffs-
appellants for temporary injunction against the non-applicants and the
counter temporary injunction application filed on behalf of the non-
applicants were partly allowed and it was ordered that till the decision of
the original suit:-
1. The applicants and non-applicants no.1 to 31 and the non-applicants
no.36 to 43 shall not sell/transfer the immovable properties as mentioned
in Schedule “Ka” to “Cha” and nor shall they create any substantial charge
on the said properties.
2. The Companies/Partnership firms controlled and run by the parties of
which the details have been given in Schedule “Ka” to “Cha” regarding them
the audited accounts of income and expenditure half yearly/annually
whichever is got done in the normal sequence shall be presented before this
Court.
Apart from this the other prayers which have been made by both the
parties are rejected. =
Reliance Natural Resources Ltd. v. Reliance Industries Ltd. (2010) 7 SCC 1
and in the case of Sangram Singh P. Gaekwad and others v. Shantadevi P.
Gaekwad (D) Through LRs. & Ors. (2005) 11 SCC 314 and submitted that though
a company incorporated under the Companies Act is a body corporate, in
certain situations, its corporate veil can be lifted and that the suit for
partition could be filed against companies also.
C.M.A.
The High Court by impugned judgment and order dated 14th March, 2012
observed as follows:
”6………It is also significant to note that the plaintiffs have impleaded the
companies, partnership firms and proprietary concerns and HUFs as the party
defendants, and the said companies and firms have also been shown as the
properties or the assets of the HUF in the schedule 'Gha' annexed to the
plaint.
This court fails to understand as to how the companies which are
incorporated under the Companies Act having perpetual seal and separate
entity could be the assets of the HUF as alleged by the plaintiffs and as
to how the companies could be divided by metes and bounds by way of
partition as prayed for in the suit.
The plaintiffs in the suit have also
prayed for mandatory injunction seeking direction against the defendant-
companies alongwith other defendants to act upon the family settlement,
alleged to have taken place on 20.12.2007 between the Niranjan Lal Data
Group and Babu Lal Data Group, and have also sought the direction against
the said companies to execute the documents and handover the possession of
the properties of the said companies and firms etc.
This court also fails
to understand as to how the alleged family settlement between the NLD Group
and BLD Group would be binding to the defendant companies and firms, apart
from the issue as to whether the alleged document dated 20.12.2007 could be
called a family settlement.
Under the circumstances this court finds much
substance in the submission made by the learned counsel for the appellants
that the suit filed by the plaintiffs is not only bad for mis-joinder of
parties and of causes of action, but also for non-joinder of necessary
parties and that the suit in the present form would not be maintainable in
the eye of law.

7. So far as merits of the case are concerned, according to the
respondents-plaintiffs, all the properties mentioned in the Schedules 'Ka'
to 'Chha' annexed to the plaint, were purchased from the nucleus of the
joint family properties, and as per the family settlement dated 20.12.07,
the said properties were required to be divided amongst the family members
of the plaintiff No. 1 and the defendant Nos.1 to 9.
In this regard, it is
pertinent to note that the entire suit of the plaintiffs is based on the so-
called family settlement which had allegedly taken place between the NLD
group and BLD group on 20.12.07.
From the bare perusal of the said document
it transpires that it is the minutes of the meeting of Data Group Family
dated 20.12.07, which was signed by Mr. Vijay Data for NLD Group and Mr.
Babu Lal Data for BLD Group. Apart from the fact that there is not a
whisper in the said document that the corpus of the companies mentioned in
the said document was provided by the HUF or that the other properties
mentioned in the said document were the HUF properties, the said document
has also not been signed by the other coparceners of the alleged HUF except
by Mr. Vijay Data and Mr. Babu Lal Data.
Such a document by no stretch of
imagination could be said to be a family settlement. However, even if it is
believed to be a family settlement, and even if it is held that the same
was not required to be signed by all the coparceners, then also there is
nothing on the record to suggest that it was a memorandum prepared after
the family arrangement which had already been made earlier, not required to
be registered. ………….

“9. In this regard it is pertinent to note that though the concerned
defendants had raised contentious issues as regards the maintainability of
the suit, mis-joinder of parties and of causes of action, suppression of
material facts by the plaintiffs etc., the lower court has not considered
the same and has held that the plaintiffs had established the prima facie
case in their favour.
In the opinion of this court such a finding of the
lower court in the impugned order is not only erroneous but also perverse.
When the suit on the face of it suffered from the mis-joinder of parties
and of causes of action and was not prima facie tenable in the eye of law,
the lower court has committed serious error of law and facts in holding
that the plaintiffs had established a prima facie case.
If the plaintiffs
were not entitled to the final reliefs in the suit, they could not be
granted temporary injunction as prayed for during the pendency of the
suit.”
Apex court held that
we are of the opinion that while
dealing with a matter relating to vacation of order of temporary
injunction, it was not open for the High Court to give a finding on the
main issue relating to maintainability of the suit and the family
settlement reached between the parties.
8. In view of the finding aforesaid, we are inclined to interfere with
the judgment and order dated 14th March, 2012 passed by the High Court of
Judicature for Rajasthan, Bench at Jaipur in S.B. Civil Misc. Appeal
No.2218 of 2011 etc. We, accordingly, set aside the impugned judgment and
remit back the matter to the High Court for its fresh disposal after
hearing the parties.

2014 -Aug.part – http://judis.nic.in/supremecourt/filename=41811

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 7174 OF 2014
(Arising out of SLP(C) No.9914 of 2012)

BABU LAL & ORS. … APPELLANTS

VERSUS

M/S VIJAY SOLVEX LTD. & ORS. … RESPONDENTS

WITH

C.A. NO.7175 OF 2014 (@ SLP(C)No.10363/2012)

C.A. NOs.7195-7201 OF 2014 (@ SLP(C)Nos.18158-18164/2012)

C.A. NO.7177 OF 2014 (@ SLP(C)No.18420/2012)

J U D G M E N T

SUDHANSU JYOTI MUKHOPADHAYA, J.

Leave granted.
2. In these appeals the appellants have challenged the common judgment
and order dated 14th March, 2012 passed by the High Court of Judicature for
Rajasthan, Bench at Jaipur in S.B. Civil Misc. Appeal No. 2218 of 2011 etc.
By the impugned judgment, the High Court modified the interim order dated
10th February, 2011 passed by the Additional District Judge No.3 Jaipur
Metropolitan Magistrate, Jaipur (hereinafter referred to as, “the Lower
Court”) in Civil Misc. Case No.36/2010, whereby the Lower Court
partly allowed the application of the appellants-original plaintiffs
seeking temporary injunction under Order XXXIX Rule 1,2 of CPC. The High
Court set aside the temporary injunction granted in favour of
plaintiffs/appellants by the Lower Court and confirmed that part of the
order requiring production of audited/unaudited accounts of the
companies/partnership firms run by the parties.
3. The present appeals arise from the following sequence of facts.
Plaintiffs/appellants-Babulal and others filed a suit for
declaration, mandatory injunction, rendition of accounts and permanent
injunction against the defendants/non-applicants. The Lower Court noticed
that the properties which the plaintiffs presented in the Schedules “Ka” to
“Cha” are basically immovable properties, companies and partnership firms
regarding which both the parties have claimed ownership. Taking into
consideration that the dispute between the parties has arisen after the
year 2007 and the cases are pending before the Company Law Board and if a
restraint is not imposed upon the transfer of the aforesaid properties it
will lead to multiplicity of litigation and the parties will entangle in
litigation, the Lower Court observed that plaintiffs/appellants have made
out partially a prima facie case and held that the issue of balance of
convenience and irreparable loss are in favour of the
plaintiffs/appellants. Resultantly, the application of the plaintiffs-
appellants for temporary injunction against the non-applicants and the
counter temporary injunction application filed on behalf of the non-
applicants were partly allowed and it was ordered that till the decision of
the original suit:-
1. The applicants and non-applicants no.1 to 31 and the non-applicants
no.36 to 43 shall not sell/transfer the immovable properties as mentioned
in Schedule “Ka” to “Cha” and nor shall they create any substantial charge
on the said properties.
2. The Companies/Partnership firms controlled and run by the parties of
which the details have been given in Schedule “Ka” to “Cha” regarding them
the audited accounts of income and expenditure half yearly/annually
whichever is got done in the normal sequence shall be presented before this
Court. Apart from this the other prayers which have been made by both the
parties are rejected.

4. The non-applicants preferred different miscellaneous appeals against
the aforesaid interim order of injunction before the High Court. The non-
applicants-respondents herein made the following submissions:
(a) The suit of the plaintiffs in the present form is not maintainable in
the eyes of law, inasmuch as it has been filed by Sh. Babulal along with
Saurabh Agrotech Pvt. Ltd., which is a company incorporated under the
Companies Act, two partnership firms registered under the Partnership Act
jointly and the HUF of Babulal, seeking partition of the properties
mentioned in the Schedules annexed to the plaint and that too against the
set of companies, which have been shown as the assets of the HUF.
(b) Plaintiff-Babulal though seeking partition of the joint family
properties has not impleaded his own sons and other coparceners as parties
to the suit and has not included the properties owned and managed by the
plaintiffs in the schedules annexed to the plaint. Therefore, it was argued
that the suit itself is bad for non-joinder of necessary parties and of
causes of action and the suit is not tenable in the eye of law.
(c) The Lower Court failed to consider the contentions raised by the
concerned defendants and also the documents produced by them.

5. On the other hand, learned counsel for the plaintiffs-appellants made
the following submissions:
(a) The Lower Court has passed the impugned order which is just and
proper after considering the prima facie case, irreparable injuries likely
to be caused to the plaintiffs and the balance of convenience.
(b) On 20th December, 2007, a family settlement has taken place between
Niranjan Lal Data Group which belong to the defendants and Babu Lal Data
Group which belong to the plaintiffs and that the said settlement was
signed by Mr. Vijay Data for Niranjan Lal Data Group and by Babu Lal Data
for Babu Lal Data Group. The said settlement was also partly acted upon by
the defendant-Niranjan Lal and other coparceners and therefore, they cannot
be permitted to back out from the said settlement.

Learned counsel also placed reliance upon decisions of this Court in
Reliance Natural Resources Ltd. v. Reliance Industries Ltd. (2010) 7 SCC 1
and in the case of Sangram Singh P. Gaekwad and others v. Shantadevi P.
Gaekwad (D) Through LRs. & Ors. (2005) 11 SCC 314 and submitted that though
a company incorporated under the Companies Act is a body corporate, in
certain situations, its corporate veil can be lifted and that the suit for
partition could be filed against companies also.
It was further contended on behalf of the plaintiffs-appellants that
the family settlement need not be signed by coparceners and that if a mere
memorandum of family arrangement was prepared with regard to the
arrangement which had already taken place; such a document did not require
registration. The family settlement made by the parties bona fide by making
fair and equitable division of the properties amongst various members of
the family must be respected.
6. The High Court by impugned judgment and order dated 14th March, 2012
observed as follows:
”6………It is also significant to note that the plaintiffs have impleaded the
companies, partnership firms and proprietary concerns and HUFs as the party
defendants, and the said companies and firms have also been shown as the
properties or the assets of the HUF in the schedule 'Gha' annexed to the
plaint. This court fails to understand as to how the companies which are
incorporated under the Companies Act having perpetual seal and separate
entity could be the assets of the HUF as alleged by the plaintiffs and as
to how the companies could be divided by metes and bounds by way of
partition as prayed for in the suit. The plaintiffs in the suit have also
prayed for mandatory injunction seeking direction against the defendant-
companies alongwith other defendants to act upon the family settlement,
alleged to have taken place on 20.12.2007 between the Niranjan Lal Data
Group and Babu Lal Data Group, and have also sought the direction against
the said companies to execute the documents and handover the possession of
the properties of the said companies and firms etc. This court also fails
to understand as to how the alleged family settlement between the NLD Group
and BLD Group would be binding to the defendant companies and firms, apart
from the issue as to whether the alleged document dated 20.12.2007 could be
called a family settlement. Under the circumstances this court finds much
substance in the submission made by the learned counsel for the appellants
that the suit filed by the plaintiffs is not only bad for mis-joinder of
parties and of causes of action, but also for non-joinder of necessary
parties and that the suit in the present form would not be maintainable in
the eye of law.

7. So far as merits of the case are concerned, according to the
respondents-plaintiffs, all the properties mentioned in the Schedules 'Ka'
to 'Chha' annexed to the plaint, were purchased from the nucleus of the
joint family properties, and as per the family settlement dated 20.12.07,
the said properties were required to be divided amongst the family members
of the plaintiff No. 1 and the defendant Nos.1 to 9. In this regard, it is
pertinent to note that the entire suit of the plaintiffs is based on the so-
called family settlement which had allegedly taken place between the NLD
group and BLD group on 20.12.07. From the bare perusal of the said document
it transpires that it is the minutes of the meeting of Data Group Family
dated 20.12.07, which was signed by Mr. Vijay Data for NLD Group and Mr.
Babu Lal Data for BLD Group. Apart from the fact that there is not a
whisper in the said document that the corpus of the companies mentioned in
the said document was provided by the HUF or that the other properties
mentioned in the said document were the HUF properties, the said document
has also not been signed by the other coparceners of the alleged HUF except
by Mr. Vijay Data and Mr. Babu Lal Data. Such a document by no stretch of
imagination could be said to be a family settlement. However, even if it is
believed to be a family settlement, and even if it is held that the same
was not required to be signed by all the coparceners, then also there is
nothing on the record to suggest that it was a memorandum prepared after
the family arrangement which had already been made earlier, not required to
be registered. ………….

“9. In this regard it is pertinent to note that though the concerned
defendants had raised contentious issues as regards the maintainability of
the suit, mis-joinder of parties and of causes of action, suppression of
material facts by the plaintiffs etc., the lower court has not considered
the same and has held that the plaintiffs had established the prima facie
case in their favour. In the opinion of this court such a finding of the
lower court in the impugned order is not only erroneous but also perverse.
When the suit on the face of it suffered from the mis-joinder of parties
and of causes of action and was not prima facie tenable in the eye of law,
the lower court has committed serious error of law and facts in holding
that the plaintiffs had established a prima facie case. If the plaintiffs
were not entitled to the final reliefs in the suit, they could not be
granted temporary injunction as prayed for during the pendency of the
suit.”

7. We have heard learned counsel for the parties and have perused the
record. In the present case, the parties have raised similar pleas which
were taken before the High Court. However, we are of the opinion that while
dealing with a matter relating to vacation of order of temporary
injunction, it was not open for the High Court to give a finding on the
main issue relating to maintainability of the suit and the family
settlement reached between the parties.
8. In view of the finding aforesaid, we are inclined to interfere with
the judgment and order dated 14th March, 2012 passed by the High Court of
Judicature for Rajasthan, Bench at Jaipur in S.B. Civil Misc. Appeal
No.2218 of 2011 etc. We, accordingly, set aside the impugned judgment and
remit back the matter to the High Court for its fresh disposal after
hearing the parties.
9. The appeals stand disposed of with aforesaid observations.

……………………………………………………………………………J.
(SUDHANSU JYOTI MUKHOPADHAYA)

…………………………………………………………………………J.
(S.A.BOBDE)

NEW DELHI,
August 4, 2014.

Black Listing - Show cause Notice - Non- mention of Black listing in the proposed notice - whether it causes prejudice or not - High court held that No prejudice is caused as pleaded by Respondent - Apex court held that In the first instance, we may point out that no such case was set up by the respondents that by omitting to state the proposed action of blacklisting, the appellant in the show cause notice has not caused any prejudice to the appellant. Moreover, had the action of black listing being specifically proposed in the show cause notice, the appellant could have mentioned as to why such extreme penalty is not justified. It could have come out with extenuating circumstances defending such an action even if the defaults were there and the Department was not satisfied with the explanation qua the defaults. It could have even pleaded with the Department not to blacklist the appellant or do it for a lesser period in case the Department still wanted to black list the appellant. Therefore, it is not at all acceptable that non mentioning of proposed blacklisting in the show cause notice has not caused any prejudice to the appellant. =CIVIL APPEAL NOS. 7167-7168 OF 2014 [Arising out of Special Leave Petition (Civil) No. 38898-38899 of 2013) GORKHA SECURITY SERVICES .....APPELLANT(S) VERSUS GOVT. OF NCT OF DELHI & ORS. .....RESPONDENT(S) = 2014 -Aug.part – http://judis.nic.in/supremecourt/filename=41804

Black Listing - Show cause Notice - Non- mention of Black listing in the proposed notice - whether it causes prejudice or not - High court held that No prejudice is caused as pleaded by Respondent - Apex court held that In the first instance, we may point out that no such case was set up by the respondents that by omitting to state the proposed action of blacklisting, the appellant in the show cause notice has not caused any prejudice to the appellant.
Moreover, had the action of black listing being specifically proposed in the show cause notice, the appellant could have mentioned as to why such extreme penalty is not justified. It could have come out with extenuating circumstances defending such an action even if the defaults were there and the Department was not satisfied with the explanation qua the defaults. It could have even pleaded with the Department not to blacklist the appellant or do it for a lesser period in case the Department still wanted to black list the appellant. Therefore, it is not at all acceptable that non mentioning of proposed blacklisting in the show cause notice has not caused any prejudice to the appellant. =

interesting question of law pertaining to
the form and content of show cause notice, that is required to be served,
before deciding as to whether the noticee is to be blacklisted or not.
We
may point out at the outset that there is no quarrel between the parties on
the proposition that it is a mandatory requirement to give such a show
cause notice before black listing.
It is also undisputed that in the
present case the show cause notice which was given for alleged failure on
the part of the appellant herein to commence/ execute the work that was
awarded to the appellant, did not specifically propose the action of
blacklisting the appellant firm.
The question is as to
whether it is a
mandatory requirement that there has to be a stipulation
contained in the show cause notice that action of blacklisting is proposed?
If yes, is it
permissible to discern it from the reading of impugned show cause notice,
even when not specifically mentioned, that the appellant understood that it
was about the proposed action of blacklisting that could be taken against
him?=

In the first instance, we may point out that no such case was set up
by the respondents that by omitting to state the proposed action of
blacklisting, the appellant in the show cause notice has not caused any
prejudice to the appellant.
Moreover, had the action of black listing
being specifically proposed in the show cause notice, the appellant could
have mentioned as to why such extreme penalty is not justified.
It could
have come out with extenuating circumstances defending such an action even
if the defaults were there and the Department was not satisfied with the
explanation qua the defaults.
It could have even pleaded with the
Department not to blacklist the appellant or do it for a lesser period in
case the Department still wanted to black list the appellant.
Therefore, it
is not at all acceptable that non mentioning of proposed blacklisting in
the show cause notice has not caused any prejudice to the appellant.
This
apart, the extreme nature of such a harsh penalty like blacklisting with
severe consequences, would itself amount to causing prejudice to the
appellant.
34) For the aforesaid reasons, we are of the view that the impugned
judgment of the High Court does not decide the issue in correct
prospective.
The impugned order dated 11.9.2013 passed by the respondents
blacklisting the appellant without giving the appellant notice thereto, is
contrary to the principles of natural justice as it was not specifically
proposed and, therefore, there was no show cause notice given to this
effect before taking action of blacklisting against the appellant.
We,
therefore, set aside and quash the impugned action of blacklisting the
appellant.
The appeals are allowed to this extent. However, we make it
clear that it would be open to the respondents to take any action in this
behalf after complying with the necessary procedural formalities delineated
above.
35) No costs.

2014 -Aug.part – http://judis.nic.in/supremecourt/filename=41804

REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLANT JURISDICTION
CIVIL APPEAL NOS. 7167-7168 OF 2014
[Arising out of Special Leave Petition (Civil) No. 38898-38899 of 2013)

GORKHA SECURITY SERVICES .....APPELLANT(S)

VERSUS

GOVT. OF NCT OF DELHI & ORS. .....RESPONDENT(S)

J U D G M E N T

A.K. SIKRI, J.

Leave granted.
2) Present appeals raise an interesting question of law pertaining to
the form and content of show cause notice, that is required to be served,
before deciding as to whether the noticee is to be blacklisted or not. We
may point out at the outset that there is no quarrel between the parties on
the proposition that it is a mandatory requirement to give such a show
cause notice before black listing. It is also undisputed that in the
present case the show cause notice which was given for alleged failure on
the part of the appellant herein to commence/ execute the work that was
awarded to the appellant, did not specifically propose the action of
blacklisting the appellant firm. The question is as to whether it is a
mandatory requirement that there has to be a stipulation contained in the
show cause notice that action of blacklisting is proposed? If yes, is it
permissible to discern it from the reading of impugned show cause notice,
even when not specifically mentioned, that the appellant understood that it
was about the proposed action of blacklisting that could be taken against
him?
3) The factual narration, leading to the impugned action viz. of
blacklisting the appellant firm does not require much elaboration. Stating
the following events would serve the purpose of addressing the issue at
hand.
4) The appellant, which is a partnership firm, was awarded the contract
vide letter of award dated 1.9.2011 for providing security services in Shri
Dada Dev Matri Avum Shishu Chiktsalaya, Dabri, New Delhi (hereinafter
referred to as the 'hospital). This hospital is under the administration of
Respondent No. 1 viz. Government of NCT of Delhi. The contract was for a
period of 1 year i.e. from 2.9.2011 to 1.9.2012. The payment was required
to be made contractually to the appellant on monthly basis. Though the
contract was upto 1.9.2012, the appellant continued to provide services
even thereafter. The case of the appellant is that it has not been given
any payment after the expiry of the contract period though it worked till
31.7.2013.
5) It appears that the respondents had issued a communication dated
4.8.2012, in continuation of their earlier letter dated 17.10.2011,
requiring the appellant to submit the valid EPF/ ESIC certificate, list of
persons deployed along with copies of their educational certificates,
police verification report, medical examination report etc. and to make the
payment of prescribed minimum wages to the workers through ECS or by cheque
and deposit the EPF/ESIC and service tax etc. This communication further
mentioned that inspite of the lapse of a long period the appellant had
failed to submit the requisite documents/ information and was not making
full payment of minimum prescribed wages to its workmen/ security guards
nor was providing the statutory benefits like EPF/ ESIC. Certain other
deficiencies in the performance of the contract were also alleged therein.
The appellant, in the first instance, sent the letter dated 7.8.2012 in
response to the aforesaid notice, stating that it had obtained the EPF and
ESIC numbers in respect of deployed security personnel and deposited their
contributions towards EPF & ESIC with the concerned authorities. Proof in
support of this was also furnished in the form of photocopies of
consolidated challans with the bills. The appellant specifically maintained
that it had made payment to the workers as per Minimum Wages Act.
6) Detailed reply to the notice dated 4.8.2012 was given by the
appellant on 17.8.2012 wherein photocopies of bio-data in respect of
deployed 32 security personnel alongwith police verification report as well
as list of security personnel along with their date of birth, educational
qualifications, addresses and EPF & ESIC numbers were given. Other issues
mentioned in notice dated 4.8.2012 were also addressed.
7) The respondent authorities, however, were not satisfied with the
reply which resulted in serving of the show cause notice dated 6.2.2013
upon the appellant detailing various lapses, which the appellant had
allegedly committed. Since the entire dispute revolves around the nature
of action that was stipulated therein and was proposed to be taken, we
would like to reproduce that part of the show cause notice in verbatim:
“And whereas, by the above act and omissions, the firm has not only failed
to provide minimum wages and extend the statutory benefits and abide by the
labour laws, but also failed to provide satisfactory services and failed to
submit the required information/ document, as and when called for and also
being pre-requisite under the tender terms and conditions, and have
rendered this hospital at the risk by deputing the less security personnels
that too without prior intimation of the credentials of the deployed staff
and police verification, as such liable to be levied the cost accordingly.
Therefore, you are directed to show case within 7 days of the
receipt of this notice, as to why the action as mentioned above may not be
taken against the firm, beside other actions as deemed fit by the competent
authority.
(emphasis supplied)”.

8) The appellant furnished detailed reply dated 25.4.2013 to the
aforesaid show cause notice taking the position that the appellant firm had
adhered to and complied with all the obligations contained in the contract
signed between the parties and it was the respondent who had defaulted in
making the payment to the appellant inspite of various reminders issued. It
was thus maintained that there was no violation of the terms and conditions
of the agreement on the part of the appellant and the respondents were
requested to withdraw the show cause notice and make the payment due to the
appellant within 15 days with interest at the rate of 18% from the date it
became payable.
9) On receipt of the aforesaid reply, respondents sent another
communication dated 30.5.2013 calling upon the appellant to submit certain
documents. This was adverted to by the appellant in the form of reply dated
8.6.2013 reiterating the position taken earlier viz. the appellants were
adhering to all the statutory obligations and submitting documents with the
department. The appellant again insisted that respondents who were not
releasing the payment and instead threatening the appellant to terminate
the contract.
10) First communication which was received, thereafter, by the appellant
was letter dated 30.7.2013 informing the appellant that the contract of the
appellant would stand terminated from 31.8.2013 (A.N.) and the appellant
was directed to wind up its work and hand over the charge to the in-charge
outsourcing for further arrangements. The appellant took exception to this
move on the part of the respondent vide its letter dated 31.7.2013 alleging
that the contract was sought to be terminated without assigning any valid
reasons which was unjustified, that too when no payment was made for the
services rendered by the appellant. By another letter dated 14.8.2013, the
appellant repeated its request for release of payment.
11) At this juncture impugned order dated 11.9.2013 was passed by the
respondents wherein the respondents maintained that the appellant had
violated the terms and conditions of the Contract Labour Laws and had also
not complied with certain other requirements stipulated in the agreement
between the parties. In view thereof, vide this order, various penalties
were imposed upon the appellant in the following form:-
(i) A penalty of Rs. 3000/- (Rupees Three Thousand only) under clause 27
(c) of the T&C, on account of public complaints.
(ii) A penalty of Rs. 41,826/- (Rupees Forty One Thousand Eight Hundred
Twenty Six only) under Clause 27 (c) (a) (i) on account of unsatisfactory
performance and not abiding by the statutory requirements.
(iii) A penalty of forfeiture of performance guarantees amounting to Rs.
3,70,000/- (Rupees Three Lac Seventy Thousand only) submitted at the
commencement of contract.
(iv) A penalty of blacklisting the firm M/s Gorkha Security for a period
of 4 years from the date of this order, from participating the tenders in
any of the department of Delhi Government/ Central Government/ Autonomous
Body under the Government.
(v) Since, the firm has made the payment of wages @ Rs. 4,000/- per month
per person which is less than the prescribed rates of minimum wages, and
submitted no proof of payment of wages, EPF and ESI etc. in spite of
opportunities given over the years, hence, it is ordered to release the
payment only @ Rs. 4,000/- per month per person plus applicable taxes after
deducting the penalty imposed at 1 & 2 above and withhold rest of the
payment of bills to the extent of amount over and above Rs. 4,000/- per
month per person, till the payment of full wages to the employees and
submissions of the proof of disbursing minimum prescribed wages and
depositing the EPF and ESI contributions in respect of each deployed
employees who have actually deployed and worked in this hospital duly
verified by the authorities concerned.

12) The appellant preferred an appeal dated 23.9.2013, against the
aforesaid order, to the Principal Secretary (H&FW). However, it did not
evoke any response from the Secretary and in these circumstances the
appellant approached the High Court of Delhi by filing the Writ Petition
under Article 226 of the Constitution of India, seeking quashing of the
orders dated 11.9.2013. The said order was assailed by the appellant
primarily on the following grounds:-
(i) The show-cause notice dated 6.2.2013 made no reference to the
proposed blacklisting of the appellant and, therefore, the appellant had no
opportunity to make a representation in this regard;
(ii) No opportunity of personal hearing was given to the appellant before
passing the impugned order; and
(iii) There was no ground for blacklisting the appellant since no term of
the agreement was breached by it.

13) The learned Single Judge of the High Court did not find any merit in
any of the aforesaid grounds and dismissed the writ petition by reason of
the judgment dated 25.10.2013. It was held that the State had the power to
blacklist a person, which was a necessary concomitant to the executive
power of the State to carry on the trade or the business and making of
contracts for any purpose, etc., as held in Patel Engineering Ltd. v. Union
of India; (2012) 11 SCC 257. In this judgment, the Supreme Court had also
taken the view that there is no inviolable rule that a personal hearing has
to be given to the affected party before taking a decision. Referring to
the terms and conditions of the contract, as contained in the NIT, which
form part of the agreement, and particularly Clause 27 (a) (ii), the Court
noticed that there was specific power reserved by the respondent to black
list the defaulting contractor for a period of 4 years. In view of that
power it held that the appellant was rightly blacklisted. In so far as
argument of the appellant that show cause notice did not specifically refer
to the proposed action of black listing, that plea was rejected in the
following terms:

“It would thus be seen that the contract between the parties specifically
empowered the respondents to blacklist the appellant firm. Therefore, when
the show cause notice received by the appellant expressly mentioned of such
action as may be deemed appropriate by the Competent Authority, the
appellant could easily visualize that the action proposed by the Competent
Authority could include blacklisting of the appellant-firm. Considering the
express terms of the contract between the parties, it was not necessary for
the respondent to specifically refer to the proposed blacklisting in the
show cause notice issued to the appellant. The purpose of show cause notice
is primarily to enable the noticee to meet the grounds on which an action
is proposed against it and such grounds were fully detailed in the show
cause notice issued to the appellant. In fact, even prior to issue of the
show cause notice, the appellant was aware of the issues between the
parties through the notice dated 4.8.2012. It would, therefore, be
difficult to say that the appellant did not know what case it had to meet
while responding to the show-cause notice. In any case, the appellant did
respond to the show cause notice without claiming the ambiguity in the said
notice and, therefore, it is not open to it to assail the impugned order on
the ground that there was no specific reference to the proposed
blacklisting of in the said notice”.

14) Not satisfied with the aforesaid outcome, the appellant preferred
Letters Patent Appeal before the Division Bench of the High Court. However,
it has met the same fate in as much as the High Court has dismissed the
appeal vide impugned judgment dated 29.11.2013 affirming the view taken by
the learned Single Judge.
15) It is in this backdrop, question which has arisen for our
consideration in the present case is as to whether action of blacklisting
could be taken without specifically proposing/ contemplating such an action
in the show cause notice? To put it otherwise, whether the power of
blacklisting contained in Clause 27 of the NIT, was sufficient for the
appellant to be on his guards, and to presume that such an action could be
taken even though not specifically spelled out in the show cause notice?
16) We have heard the learned Counsel for the parties appearing on the
either side on the aforesaid aspects, in detail. Before we proceed to
answer the question we may restate and highlight the legal position about
which there is neither any dispute, nor can there be as there is no escape
from the below stated legal principle:
Necessity of serving show cause notice as a requisite of the Principles of
Natural Justice:
17) It is a common case of the parties that the blacklisting has to be
preceded by a show cause notice. Law in this regard is firmly grounded and
does not even demand much amplification. The necessity of compliance with
the principles of natural justice by giving the opportunity to the person
against whom action of blacklisting is sought to be taken has a valid and
solid rationale behind it. With blacklisting many civil and/ or evil
consequences follow. It is described as “civil death” of a person who is
foisted with the order of blacklisting. Such an order is stigmatic in
nature and debars such a person from participating in Government Tenders
which means precluding him from the award of Government contracts. Way back
in the year 1975, this court in the case of M/s. Erusian Equipment &
Chemicals Ltd. v. State of West Bengal & Anr.; (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. This is clear from the reading of Para Nos. 12 and 20 of the said
judgment. Necessitating this requirement, the court observed thus:
“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”.

Again, in Raghunath Thakur v. State of Bihar and Ors.;(1989) 1 SCC 229 the
aforesaid principle was reiterated in the following manner:-
“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. 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. In the premises,
that portion of the order directing that the appellant be placed in the
blacklist in respect of future contracts under the Collector is set aside.
So far as the cancellation of the bid of the appellant is concerned, that
is not affected. This order will, however, not prevent the State Government
or the appropriate authorities from taking any future steps for
blacklisting the appellant if the Government is so entitled to do in
accordance with law i.e. after giving the appellant due notice and an
opportunity of making representation. After hearing the appellant, the
State Government will be at liberty to pass any order in accordance with
law indicating the reasons therefor. We, however, make it quite clear that
we are not expressing any opinion on the correctness of otherwise of the
allegations made against the appellant. The appeal is thus disposed of.”

Recently, in the case of Patel Engineering Ltd. v. Union of India and Anr.;
(2012) 11 SCC 257 speaking through one of us (Jasti Chelameswar, J.) this
Court emphatically reiterated the principle by explaining the same in the
following manner:
“13. The concept of “blacklisting” is explained by this Court in Erusian
Equipment & Chemicals Ltd. v. State of W.B. as under:

“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.”

14. The nature of the authority of the State to blacklist the persons was
considered by this Court in the abovementioned case and took note of the
constitutional provision (Article 298), which authorises both the Union of
India and the States to make contracts for any purpose and to carry on any
[pic]trade or business. It also authorises the acquisition, holding and
disposal of property. This Court also took note of the fact that the right
to make a contract includes the right not to make a contract. By
definition, the said right is inherent in every person capable of entering
into a contract. However, such a right either to enter or not to enter into
a contract with any person is subject to a constitutional obligation to
obey the command of Article 14. Though nobody has any right to compel the
State to enter into a contract, everybody has a right to be treated equally
when the State seeks to establish contractual relationships. The effect of
excluding a person from entering into a contractual relationship with the
State would be to deprive such person to be treated equally with those, who
are also engaged in similar activity.

15. It follows from the above judgment in Erusian Equipment case that the
decision of the State or its instrumentalities not to deal with certain
persons or class of persons on account of the undesirability of entering
into the contractual relationship with such persons is called blacklisting.
The State can decline to enter into a contractual relationship with a
person or a class of persons for a legitimate purpose. The authority of the
State to blacklist a person is a necessary concomitant to the executive
power of the State to carry on the trade or the business and making of
contracts for any purpose, etc. There need not be any statutory grant of
such power. The only legal limitation upon the exercise of such an
authority is that the State is to act fairly and rationally without in any
way being arbitrary—thereby such a decision can be taken for some
legitimate purpose. What is the legitimate purpose that is sought to be
achieved by the State in a given case can vary depending upon various
factors.”

18) 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
Engineering (supra).
Contents of Show Cause Notice
19) 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.
20) 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 on 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 be clearly and safely be discerned from the
reading thereof, that would be sufficient to meet this requirement.
Discussion with reference to the instant case:
21) With the aforesaid statement of law, now let us proceed with the
present case scenario.
22) It would be necessary to take note of the relevant portion of clause
27 of the NIT under which umbrage is taken by the respondents to justify
their action, and even appealed to the High Court. Clause 27 (a) (c) (a)
reads as under:
“a.... (sic) In case the contractor fails to commence/ execute the work as
stipulated in the agreement or unsatisfactory performance or does not meet
the statutory requirements of the contract, Department reserves the right
to impose the penalty as detailed below:-

(i) 20% of cost of order/ agreement per week, upto two weeks' delays.

(ii) After two weeks delay Principal Employer reserves the right to cancel
the contract and withhold the agreement and get this job carried out
preferably from other contractor(s) registered with DGR and then from open
market or with other agencies if DGR registered agencies are not in a
position to provide such Contractor(s). The difference if any will be
recovered from the defaulter contractor and also shall be blacklisted for a
period of 4 years from participating in such type of tender and his earnest
money/ security deposit may also be forfeited, if so warranted.”

23) It is clear from the reading of the aforesaid clause that when there
is a failure on the part of the contractor to comply with the express terms
of the contract and/ or to commit breach of the said terms resulting into
failure to commence/ execute the work as stipulated in the agreement or
giving the performance that does not meet the statutory requirements of the
contract, the Department has a right to impose various kinds of penalties
as provided in the aforesaid clause. These penalties are of the following
nature:-

(i) Penalty in the form of 20% of cost of orders/ agreement per week,
upto delay of 2 weeks.

(ii) If the delay is beyond 2 weeks then:
a) To cancel the contract and withhold the agreement. In that event,
Department has right to get the job carried out from other
contractor at the cost of the defaulter contractor;

b) To black list the defaulter contractor for a period of 4 years;

c) To forfeit his earnest money/ deposits, if so warranted.

24) In the present case, it is obvious that action is taken as provided
in sub clause 2(ii). Under this clause, as is clear from the reading
thereof, the Department had a right to cancel the contract and withhold the
agreement. That has been done. The Department has also a right to get the
job which was to be carried out by the defaulting contractor, to be carried
out from other contractor(s). In such an event, the Department also has a
right to recover the difference from the defaulting contractor. This
clause, no doubt, gives further right to the Department to blacklist the
contractor for a period of 4 years and also forfeit his earnest money/
security deposit, if so required.
25) It is thus apparent that this sub-clause provides for various actions
which can be taken and penalties which can be imposed by the Department. In
such a situation which action the Department proposes to take, need to be
specifically stated in the show cause notice. It becomes all the more
important when the action of black listing and/ or forfeiture of earnest
money/ security deposit is to be taken, as the clause stipulates that such
an action can be taken, if so warranted. The words “if so warranted”,
thus, assume great significance. It would show that it is not necessary for
the Department to resort to penalty of black listing or forfeiture of
earnest money/ security deposit in all cases, even if there is such a
power. It is left to the Department to inflict any such penalty or not
depending upon as to whether circumstances in a particular case warrant
such a penalty. There has to be due application of mind by the authority
competent to impose the penalty, on these aspects. Therefore, merely
because of the reason that clause 27 empowers the Department to impose such
a penalty, would not mean that this specific penalty can be imposed,
without putting the defaulting contractor to notice to this effect.
26) 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.
27) In the instant case, no doubt show cause notice dated 6.2.2013 was
served upon the appellant. Relevant portion thereof has already been
extracted above. This show cause notice is conspicuously silent about the
blacklisting action. On the contrary, after stating in detail the nature of
alleged defaults and breaches of the agreement committed by the appellant
the notice specifically mentions that because of the said defaults the
appellant was “as such liable to be levied the cost accordingly”. It
further says “why the action as mentioned above may not be taken against
the firm, besides other action as deemed fit by the competent authority”.
It follows from the above that main action which the respondents wanted to
take was to levy the cost. No doubt, notice further mentions that competent
authority could take other actions as deemed fit. However, that may not
fulfil the requirement of putting the defaulter to the notice that action
of blacklisting was also in the mind of the competent authority. Mere
existence of Clause 27 in the agreement entered into between the parties,
would not suffice the aforesaid mandatory requirement by vaguely mentioning
other “actions as deemed fit”.
28) As already pointed out above in so far as penalty of black listing
and forfeiture of earnest money/ security deposit is concerned it can be
imposed only, “if so warranted”. Therefore, without any specific
stipulation in this behalf, respondent could not have imposed the penalty
of black listing.

29) No doubt, rules of natural justice are not embodied rules nor can
they be lifted to the position of fundamental rights. However, their aim is
to secure justice and to prevent miscarriage of justice. It is now well
established proposition of law that unless a statutory provision either
specifically or by necessary implication excludes the application of any
rules of natural justice, in exercise of power pre-judicially affecting
another must be in conformity with the rules of natural justice.
30) We are conscious of the following words of wisdom expressed by this
Court through the pen of Justice Krishna Iyer in the case of Chairman,
Board of Mining Examination and Anr. v. Ramjee; 1977 (2) SCC 256:
“If the jurisprudence of remedies were understood and applied from the
perspective of social efficaciousness, the problem raised in this appeal
would not have ended the erroneous way it did in the High Court. Judges
must never forget that every law has a social purpose and engineering
process without appreciating which justice to the law cannot be done. Here,
the socio-legal situation we are faced with is a colliery, an explosive, an
accident, luckily not lethal, caused by violation of a regulation and
consequential cancellation of the certificate of the delinquent shot-firer,
eventually quashed by the High Court, for processual solecisms, by a writ
of certiorari.
Natural justice is no unruly horse, no lurking land mine, nor a judicial
cure all. If fairness is shown by the decision maker to the man proceeded
against, the form, features and the fundamentals of such essential
processual propriety being conditioned by the facts and circumstances of
each situation, no breach of natural justice can be complained of.
Unnatural expansion of natural justice, without reference to the
administrative realities and other factors of a given case, can be
exasperating. We can neither be finical nor fanatical but should be
flexible yet firm in this jurisdiction. No man shall be hit below the belt
– that is the conscience of the matter.... We cannot look at law in the
abstract or natural justice as a mere artefact. Nor can we fit into a rigid
mould the concept of reasonable opportunity.”

31) When it comes to the action of blacklisting which is termed as 'Civil
Death' it would be difficult to accept the proposition that without even
putting the noticee to such a contemplated action and giving him a chance
to show cause as to why such an action be not taken, final order can be
passed blacklisting such a person only on the premise that this is one of
the actions so stated in the provisions of NIT.
The “Prejudice” Argument
32) It was sought to be argued by Mr. Maninder Singh, learned ASG
appearing for the respondent, that even if it is accepted that show cause
notice should have contained the proposed action of blacklisting, no
prejudice was caused to the appellant in as much as all necessary details
mentioning defaults/ prejudices committed by the appellant were given in
the show cause notice and the appellant had even given its reply thereto.
According to him, even if the action of blacklisting was not proposed in
the show cause notice, reply of the appellant would have remained the same.
On this premise, the learned ASG has argued that there is no prejudice
caused to the appellant by non mentioning of the proposed action of
blacklisting. He argued that unless the appellant was able to show that non
mentioning of blacklisting as the proposed penalty has caused prejudice and
has resulted in miscarriage of justice, the impugned action cannot be
nullified. For this proposition he referred to the judgment of this Court
in Haryana Financial Corporation and Anr. v. Kailash Chandra Ahuja; (2008)
9 SCC 31.
“21. From the ratio laid down in B. Karunakar1 it is explicitly clear that
the doctrine of natural justice requires supply of a copy of the inquiry
officer’s report to the delinquent if such inquiry officer is other than
the disciplinary authority. It is also clear that non-supply of report of
the inquiry officer is in the breach of natural justice. But it is equally
clear that failure to supply a report of the inquiry officer to the
delinquent employee would not [pic]ipso facto result in the proceedings
being declared null and void and the order of punishment non est and
ineffective. It is for the delinquent employee to plead and prove that non-
supply of such report had caused prejudice and resulted in miscarriage of
justice. If he is unable to satisfy the court on that point, the order of
punishment cannot automatically be set aside.

31. At the same time, however, effect of violation of the rule of audi
alteram partem has to be considered. Even if hearing is not afforded to the
person who is sought to be affected or penalised, can it not be argued that
“notice would have served no purpose” or “hearing could not have made
difference” or “the person could not have offered any defence whatsoever”.
In this connection, it is interesting to note that under the English law,
it was [pic]held few years before that non-compliance with principles of
natural justice would make the order null and void and no further inquiry
was necessary.

36. The recent trend, however, is of “prejudice”. Even in those cases where
procedural requirements have not been complied with, the action has not
been held ipso facto illegal, unlawful or void unless it is shown that non-
observance had prejudicially affected the applicant.

44. From the aforesaid decisions, it is clear that though supply of report
of the inquiry officer is part and parcel of natural justice and must be
furnished to the delinquent employee, failure to do so would not
automatically result in quashing or setting aside of the order or the order
being declared null and void. For that, the delinquent employee has to show
“prejudice”. Unless he is able to show that non-supply of report of the
inquiry officer has resulted in prejudice or miscarriage of justice, an
order of punishment cannot be held to be vitiated. And whether prejudice
had been caused to the delinquent employee depends upon the facts and
circumstances of each case and no rule of universal application can be laid
down.”

33) When we apply the ratio of the aforesaid judgment to the facts of the
present case, it becomes difficult to accept the argument of the learned
ASG. In the first instance, we may point out that no such case was set up
by the respondents that by omitting to state the proposed action of
blacklisting, the appellant in the show cause notice has not caused any
prejudice to the appellant. Moreover, had the action of black listing
being specifically proposed in the show cause notice, the appellant could
have mentioned as to why such extreme penalty is not justified. It could
have come out with extenuating circumstances defending such an action even
if the defaults were there and the Department was not satisfied with the
explanation qua the defaults. It could have even pleaded with the
Department not to blacklist the appellant or do it for a lesser period in
case the Department still wanted to black list the appellant. Therefore, it
is not at all acceptable that non mentioning of proposed blacklisting in
the show cause notice has not caused any prejudice to the appellant. This
apart, the extreme nature of such a harsh penalty like blacklisting with
severe consequences, would itself amount to causing prejudice to the
appellant.
34) For the aforesaid reasons, we are of the view that the impugned
judgment of the High Court does not decide the issue in correct
prospective. The impugned order dated 11.9.2013 passed by the respondents
blacklisting the appellant without giving the appellant notice thereto, is
contrary to the principles of natural justice as it was not specifically
proposed and, therefore, there was no show cause notice given to this
effect before taking action of blacklisting against the appellant. We,
therefore, set aside and quash the impugned action of blacklisting the
appellant. The appeals are allowed to this extent. However, we make it
clear that it would be open to the respondents to take any action in this
behalf after complying with the necessary procedural formalities delineated
above.
35) No costs.

…...............................J.
[J.CHELAMESWAR]

…...............................J.
[A.K. SIKRI]

New Delhi.
August 4, 2014.

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