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PETITIONER: JOSEPH VILANGANDAN

       Vs.

RESPONDENT: THE EXECUTIVE ENGINEER, BUILDINGS & ROADS (P.W.D.) DIVISION,

DATE OF JUDGMENT20/03/1978

BENCH: SARKARIA, RANJIT SINGH BENCH: SARKARIA, RANJIT SINGH KAILASAM, P.S.

CITATION:  1978 AIR  930            1978 SCR  (3) 514  1978 SCC  (3)  36

ACT: Natural   Justice-Black  listing  of  a   contractor-Whether opportunity   of   being  heard   is   necessary-Nature   of opportunity.

HEADNOTE: The  appellant  was  a Government  Contractor  of  16  years standing.   He has been executing major building  contracts. The Executive Engineer, PWD, Ernakulam, invited tenders  for executing certain repairs to English and Mathematics  blocks of  Maharaja College at Ernakulam.  The tender given by  the appellant was accepted, and a formal agreement was executed. The  agreement  provided that the work should  be  completed within  a  stipulated  time  and  that  the  time  shall  be considered as the essence of the contract. The  appellant  alleged that in spite of  his  requests  the building  was not handed over to him to enable him to  start the  work, and that in the meantime, the  Engineers’  strike supervened  in which respondents 1 to 4  participated.   The Executive Engineer sent a letter to the appellant asking him to  show cause why the work might not be arranged  otherwise at  the  appellant’s risk and loss  through  other  agencies after debarring the appellant as a defaulter and making good the  loss  that  might accrue to  the  department  from  the subsisting  contract in the division.  The appellant sent  a reply  to the show cause notice asserting that he  committed no  default.  The Executive Engineer finally  cancelled  the contract and informed the appellant; that the work was being arranged  at  the appellant’s risk and  loss  through  other agencies after declaring him a defaulter.  The appellant was debarred  from  taking  any contracts  in  future  from  the Department  in  Ernakulam Division.  The appellant  filed  a writ  petition  under Art. 226 before the High  Court.   The learned Single Judge dismissed the Writ Petition.  An appeal filed to the Division Bench also failed: The  appellant contended in, appeal by Special  Leave,  that the  order  was  illegal and void for the  reasons  that  no opportunity was given to the appellant to represent his case before  passing  the impugned order.  ’The  respondent  con- tended that the notice given to the appellant requesting him to  show  cause why the work might not be got  done  through other agencies after debarring him as a defaulter,  afforded

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him sufficient opportunity to represent his case. Allowing the appeal the Court, HELD  (1) The majority judgment of the Kerala High Court  in the  case  of Thomas v. State of Kerala which holds  that  a person  is  not entitled to a hearing before  he  is  black- listed must be deemed to have been over-ruled by this  Court in  the case of Erusian Equipment & Chemicals Ltd. v.  State of  West  Bengal,  where it was held  that  fundamentals  of fairplay  require that the person concerned should be  given an opportunity to represent his case before he is put on the black-list.   The show cause notice given to the  appellant, if  construed  in the context of the entire para,  could  be understood  as  conveying no more than that an  action  with reference  to the contract in question only, was under  con- templation.   There are no words in the notice  which  could give  a  clear  intimation  to the  addressee  that  it  was proposed  to debar him from taking any contract whatever  in future  under  the Department.  The appellant was  thus  not afforded  adequate  opportunity  to  represent  against  the impugned action which must, therefore, be held to be bad  in law. [518 E-F, 519 A-B, D] Erusian  Equipment & Chemicals Ltd. v. State of West  Bengal [1975] 2 S.C.R. explained; Thomas v. State of Kerala  I.L.R. 1968(2) Kerala 1(F.B.) overruled.

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  2448  of 1968. 515 T. C. Raghavan, Sardar Bahadur Saharya & Vishnu Bahadur Saharya   for the appellant. S. V. Gupte & K. M. K. Nair for the Respondents. The Judgment of the Court was delivered by SARKARIA, J.-This appeal by special leave directed against a Division  Bench judgment of the Kerala High Court  raises  a question with regard to the validity of an order dated  June 20,  1968  whereby  the  Executive  Engineer  debarred   the appellant  from  taking  any  further  contract  under   the Buildings & Roads Division, Ernakulam. The  appellant  is  a  Government  Contractor  of  16  years standing.   He has been executing major building  contracts. The, Executive Engneer, P.W.D. Ernakulam (Respondent No.  1) invited  tenders  for  ,executing  certain  repairs  to  the English  and Mathematics Blocks of the Maharaja  College  at Ernakulam.  The appellant submitted a tender, dated March 8, 1967,  for  doing this work.  In response to a  letter  from Respondent  1, the appellant sent his consent letter,  dated March  27,  1967  (Ex. p-1), agreeing to  reduced  rates  of certain items of the work, on the condition that "as soon as the  Selection Notice is issued the building should  be  got vacated to facilitate the starting of the work".  The tender was then accepted by the Executive Engineer and a  Selection Notice  was  issued to the appellant on March  31,  1967  in which  it was, inter alia, stated that the  "facilities  for carrying out the work will be given as soon as you start the work". A  formal agreement was executed on April 26, 1967,  by  the appellant  and the Executive Engineer.  Condition No.  4  of the  agreement stipulated that "time shall be considered  as the  essence  of  the agreement and  the  contractor  hereby agrees  to  commence the work as soon as  the  agreement  is accepted by the competent authority (Executive Engineer) and the site (or premises) is handed over to him (contractor) as

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provided  for  in the conditions and to  complete  the  work within  6 months from the date of such handing over  of  the site (or premises)". The  appellant  alleged  that inspite of  his  request,  the Executive  Engineer and his assistants (Respondents 2 to  4) took  no steps to hand over the building in order to  enable him  to start the work. rhe repair work could commence  only after the removal of the electric wirings, and such  removal wag not done upto July 10, 1967. In the meantime, the Engineers’ strike supervened, in  which Respondents  1 to 4 participated.  The period of six  months for  carrying  out the work expired  before  the  Engineers’ strike came to an end. On  October  27, 1967, the appellant wrote a letter  to  the ’Executive  Engineer (Respondent 1), requesting for  release from the contract.  He stated :               "Due  to  some unavoidable  circumstances  the               building has not been got vacated so far.  The               completion period 516               a per the tender for the work, i.e., 6  months               is over.  Now the cost of materials and labour               have  increased  considerably.  In  the  above               circumstances  I request that I may kindly  be               released from the above agreement of work  and               the security may be released."               On  April  17, 1.968, the  Executive  Engineer               sent  a  Notice (Ex.  P-6) to  the  appellant,               which reads as follows :               "The  fulfilment of the undertaking  given  by               the department to give facilities to carry out               the work as soon as you start the work was not               even  necessitated as you have failed even  to               commence  the  work as per the  terms  of  the               contract....               You  are, therefore, requested to  show  cause               within seven days from the date of this notice               why the work may not be arranged otherwise  at               your  risk  and loss, through  other  agencies               after- debarring you as a defaulter and making               good   the  loss  that  may  accrue   to   the               department, from your subsisting contracts  in               this Division."                                 (Emphasis supplied) The appellant, on May 20, 1968, sent a reply asserting  that he committed no default; that he had collected the  required wooden   materials   necessary  for   starting   the   work, immediately  after the execution of the agreement, and  that the delay in starting the work was only due to the delay  in handing over the building to him. However,  the  Executive Engineer finally  communicated  his order,.  dated  June  20, 1968  (Ex.   P-8),  canceling  the contract and informing the appellant that "the work is being arranged at your risk and loss through other agencies  after declaring  you as a defaulter and debarring you from  taking further contract under the Division." (Emphasis supplied) To challenge this order of the Executive Engineer, debarring the  appellant  from  ’taking  further  contract  under  the Division,  a  Writ Petition (O.P. No. 2869  of  1968)  under Article  226 of the Constitution was filed by the  appellant in the Kerala High Court.  It was contended in the  petition that  the said Order (Ex.  P-8) of the  Executive  Engineer, was ultra vires, illegal and unconstitutional as it violated the appellant’s fundamental rights guaranteed under  Article 19(1)(f) and (g) of the Constitution.  He further maintained

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that  Respondent I was not right in holding the appellant  a defaulter;  nor had he any power or jurisdiction to  ’black- list’  or rebar the appellant from taking further  contracts in Ernakulam Division. In the counter-affidavit filed on behalf of Respondent 1, it was. stated : (a)  The Principal of the College when the work had to 517               be  carried out reported that the work may  be               done after the monsoon was over.               (b) During the period of the Engineers’ strike               from 11-8-67 to 5-10-67 also there was nothing               on   record  to  show  that   the   petitioner               (Appellant)   had   approached   either    the               Administrative            Officer   or    work               Superintendent  or instructions to  start  the               work  and as soon as "No Work  Programme"  was               over,  the Assistant Engineer issued a  notice               by  registered post to the appellant on  9-10-               67,  directing  him to start the  work  on  or               before 13-10-67.  The contractor did not  take               any  steps  to commence the work, but  sent  a               reply,  dated 27-10-67, requesting that he  be               released from the contract.               (c) On November 22, 1967, the Principal of the               College, wrote that all arrangements to vacate               the  building  had been  made.   Respondent  1               thereupon  sent one more notice by  registered               post  to the           petitioner  (appellant)               on  December 8, 1967, but the latter  wilfully               refused to accept the same.               (d)  It  was  wrong  that  the  appellant  had               collected  any materials at the site to  start               the work.               (e)  On April 20, 1968, a letter was  received               from  the appellant, claiming higher rates  to               execute the               work.   In the alternative, he requested  that               his  security  might be released at  an  early               date.  The appellant however admitted in  this               letter that the building in question was  made               available  to  him for executing the  work  in               October   1967.    Respondent  I   found   the               explanation of the appellant unsatisfactory. After  hearing the arguments, a learned single Judge of  the High  Court  (K.K. Mathew, J.-), dismissed the  petition  in these words "In  the  light of the majority decision in  I.L.R.  1968(2) Kerala Page 1, I dismiss the Writ Petition.  No costs." Against this judgment, the appellant preferred a Writ Appeal (No. 182 of 1968) before a Division Bench of the High Court. The Bench dismissed the appeal in limine. Hence this appeal, by special leave. Mr. Raghavan appearing for the appellant, submits that apart from  the  competency of the Executive Engineer  to  ’black- list’ or debar the appellant from faking contracts with B  & R  Department in Ernakulam Division, the impugned order  was illegal  and  void for the reason that  no  opportunity  was given  to the Appellant to represent his case before he  was put on the ’black list’.  For this contention, 518 reliance  has  been placed on the recent  decision  of  this Court in Erusian Equipment & Chemicals Ltd. v. State of West Bengal.(1) As against the above, the learned Attorney General has drawn

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our  attention  to the fact that a notice, dated  April  17, 1968  (Ex.  P-6) was given by the Executive Engineer to  the appellant  requesting the latter to show cause why the  work may  not  be  got  done  through  other  agencies,  at   the appellant’s  risk  and  loss;  after  debarring  him  as   a defaulter.   It is ’submitted that this notice did  indicate to the appellant that action to debar him from doing further contract work under the department was contemplated, and  as such,  this  case  is  not  hit  by  the  ratio  of  Erusian Equipment’s  case (ibid).  It is further maintained that  in Thomas  v. State of Kerala,(2) it was rightly observed  that the law does not deny to the Government the freedom of  con- tract  (carrying  with it the freedom not to  enter  into  a contract, it vouchsafes to every person.  Reference was also made  to the observations of this Court in C.K. Achuthan  v. State  of Kerala (3) in support of the contention  that  the impugned order does not per se offend Articles 14 and 19 (a) (g)  of  the Constitution.  Those observations  are  to  the effect  :  "There  is  no  discrimination,  because  it   is perfectly open to the Government, even as it is to a private party,  to  choose  a person to  their  liking,  to  fulfill contracts which they wish to be performed.  When one  person is  chosen rather than another, the aggrieved  party  cannot claim  the protection of Article 14, because the  choice  of the- person to fulfill a particular contract must be left to the  Government. (Because of the breach or, cancellation  of his contract, the private person) cannot complain that there has  been  a  deprivation.  of the  right  to  practice  any profession or to carry on any occupation, trade or business, such as is contemplated by Article 19(1)(g)."  (Parenthesis, within brackets, added). The majority judgment of the Kerala High Court, inasmuch  as it holds that a person is not entitled to a hearing, before: he is blacklisted, must be deemed to have been overruled  by the  decision  of  this Court in  Erusian  Equipment  (ibid) wherein  it was held that "fundamentals of fairplay  require that the person concerned should be given an opportunity  to represent  his  case  before he is put  on  the  blacklist." Controversy  in  the instant case, therefore,  narrows  down into the issue, whether such an opportunity was given to the appellant.   Answer  to  this  question  will  turn  on   an interpretation of the notice, dated April 17, 1968 (Ex.   P- 8)  given by the Executive Engineer to the appellant.   This notice  has  been  extracted in a  foregoing  part  of  this judgment.   The  material  sentence therein  is:  "You  are, therefore, requested to show cause .... why the work may not be arranged otherwise at your risk and loss, through other 1 agencies  after debarring you as  a  defaulter.............. The crucial words are those that have been underlined.  They take their color from the context.  Construed along with the links of the sentence which precede and succeed them, (1)  [1975] 2 S.C.R.674. (2)  I L R (1968) 2 Kerala 1 (F.B.) (3)  A.I.R. 1959 S.C. 490.  519 the   words  "debarring  you  as  a  defaulter",  could   be understood  as  conveying no more than that an  action  with reference  to  the  contract in  question,  only  was  under contemplation.  There are no words in the notice which could give  a  clear  intimation  to the  addressee  that  it  was proposed to debar him from taking any contract, whatever, in future under the. department.  A perusal of the  appellant’s reply (Ex.  P-7), dated May 20, 1968, sent to the  Executive Engineer, also appears to show that by the word  "debarring" mentioned in the Executive Engineer’s letter dated April 17,

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1968  (Ex.   P-6),  he  understood  as  debarring  him  from executing  the  contract in question after declaring  him  a defaulter,  and  then getting the same work  done  by  other agencies,  at his risk and loss.  All that has been said  in Ex.   P-7 by the appellant is directed to justify  that  the non-execution of the contract was not due to his fault,  but due  to the delay on the part of the department  in  handing over  the building to him for starting the work  within  the time  specified in the agreement, and consequently,  if  any loss would be incurred by the department in getting the work done  through  any other agency, he would not be  liable  to make  good the same.  In short, the letter (Ex.  P-6)  dated April 17, 1968 from the Executive Engineer, did not give any clear notice to the appellant that action to debar him  from taking   in  future  any  contract,  whatever,   under   the department  or its Ernakulam Division was in  contemplation. The appellant was thus not afforded adequate opportunity  to represent against the impugned action. This  being  the position, the rule in  Erusian  Equipment’s case  (ibid)  will  be attracted  with  full  force.   While conceding  that the State can enter into contract  with  any person  it chooses and no person has a fundamental Tight  to insist  that the Government must enter a contract with  him, this Court observed (in the said case)               "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 black list." The above enunciation squarely covers the case before us. Accordingly, we allow this appeal, set aside the judgment of the High Court and quash the impugned order.  There will  be no order as to costs. P.H.P.                                Appeal allowed. 520