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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.

1)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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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:

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“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

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.

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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).

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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,

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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.

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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

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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

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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

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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

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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

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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

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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

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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.

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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. Karunakar

1

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 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

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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 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

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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

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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.

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…...............................J.

[J.CHELAMESWAR]

…...............................J.

[A.K. SIKRI]

New Delhi.

August 4, 2014.

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