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Ambuja Hotels & Real Estates P.Ltd. v/s Indian Railway Catering & Tourism Corporation Ltd.

    W.P. (C) 726 of 2009, CM-1566 of 2009
    Decided On, 16 April 2009
    At, High Court of Delhi
    For the Petitioner: Pradeep Ranjan Tiwari, Advocate. For the Respondents: Saurav Agrawal and Dinesh Kumar, Advocates for IRCTC.

Judgment Text
S. Ravindra Bhat, J. (Open Court)

Issue Notice. Mr. Saurav Agrawal, learned counsel for the IRCTC accepts notice and states that the matter can be decided finally.

2. The petitioner challenges the order dated 6.1.2009, whereby the license awarded by the respondents (hereafter called IRCTC) on 13.1.2004 for the business of catering service in the ?Farakka Express? was cancelled.

The order also debars the petitioner from participating in future tender processes for a period of two years effective from that date.

3. It is contended by the petitioner that the order is unsustainable and arbitrary as it is premised on assumptions. Learned counsel relied upon the averments as well as the reply to the show cause notice issued by the respondent, IRCTC on 26.11.2008. Counsel contended that each of the allegations were effectively refuted ? in the reply to show cause, - and that the impugned order nevertheless was issued by IRCTC without holding proper enquiry and on the basis of assumptions.

4. Learned Sr. counsel further contended that the show cause notice issued by the respondents, proposing action against the petitioner, nowhere sought the latter?s response on the point that the concern would be debarred from future tender processes in the event of an adverse determination, on the show cause notice. This, according to him, is unsustainable in law. Counsel relied upon the decision of the Supreme Court, reported as Erusian Equipment & Chemicals ?vs- State of West Bengal 1975 (1) SCC 70.

5. Learned counsel for the respondents contended that the disputes cannot be the subject matter of writ proceedings as this does not pertain to any pre-contract administrative decision but concerns the working out of the contract duly awarded. It was also contended that Clause 8.1 of the Tender Documents governing the contract clearly stipulates that in the event of successful tenderer/contractor violating any term or condition, leading to unsatisfactory service or poor quality of articles etc. not only the license could be terminated but that the licensee would be debarred from participating in future projects.

6. It is evident from the above that the petitioner is seeking intervention of the Court under Article 226 in respect of what are essentially contractual disputes. As held by the Supreme Court in the decision State of U.P. and Ors. v. Maharaja Dharmander Prasad Singh and Ors. (1989 (2) SCC 505), National Highways Authority of India v. Ganga Enterprises (2003 (7) SCC 410), Verigamto Naveen v. Government of A.P. (2001 (8) SCC 344) , such disputes cannot be adjudicated by the High Court under Article 226, as they involve a disputed questions of fact requiring the parties to lead evidence. In such cases, it would be appropriate for the aggrieved party to approach the Civil Court or seek recourse to arbitration, if they have agreed to such mechanism.

7. The observations above are not dispositive of the petition; there is one area where the petitioner?s grievance appears to be well founded. The show cause notice issued to it nowhere reflects the IRCTC?s thinking that the petitioner?s transgressions are such as to its being debarred for any, much less a period of two years. In the circumstances, the impugned order to the extent it debars the petitioner is unsustainable in law. Before taking such action which virtually spells civil death on the concerned party, principles of natural justice which include issuance of notice, grant of reasonable and adequate opportunity by the concerned agency have to be mandatorily followed. This is the law declared in Erusian Equipment (supra); it has been unwaveringly followed and applied in applied in later judgments. In Grosons Pharmaceuticals (P) Ltd. v. State of U.P., (2001) 8 SCC 604 it was held that:

?It is true that an order blacklisting an approved contractor results in civil consequences and in such a situation in the absence of statutory rules, the only requirement of law while passing such an order was to observe the principle of audi alteram partem which is one of the facets of the principles of natural justice.?

This view has again been reiterated in B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd., (2006) 11 SCC 548.

8. The IRCTC relies on the Clause 8.1 which is in the following terms: -

?In the event of any breach of the said terms and conditions of the Licence, the IRCTC shall be entitled to forfeit the whole or the part of the Security Deposit/License fee/Concession Fee besides terminating or revoking the License and debarring the Licensee from participating in the future projects of IRCTC.?

9. The above condition no doubt stipulates that the licensee has to be debarred from participating in future projects in the event of unsatisfactory service, poor quality of articles etc. Nevertheless, in such circumstances also there is authority (D. K. Yadav v. J. M. A. Industries Ltd. (1993) 3 SCC 259 and Uptron India Ltd., v. Shammi Bhan 1998 (6) SCC 538 to say that show cause notice and principles of natural justice have to be followed, even where the authority or agency prescribes ?automatic? application of a norm, as a consequence for the occurrence of some event. Therefore, IRCTC has to perforce issue a show cause notice, in such cases, and, after granting opportunity to the contractor, exercise its discretion whether to blacklist the concern and if so to what extent. This procedure is part of the non-derogable principle of fairness, mandated by Article 14 of the Constitution of India.

10. In the circumstances, the impugned order dated 6.1.2009 to the extent it debars the petitioner for two years from participating in future projects is hereby quashed. Even under normal circumstances, the petitioner?s license originally awarded would

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have ended on 25.3.2009. In the circumstances, no purpose would be served by the Court considering the merits of the case, as setting aside of such termination order, would not lead the automatic award of fresh license. It is open to the petitioner to participate in future tender processes, or seek redressal in respect of cancellation, in accordance with law. 11. The Writ Petition has to succeed. All rights and contentions of the parties are hereby reserved. This order will also not preclude the petitioner from challenging the termination order, through arbitration. The Writ Petition is allowed, in the above terms. No costs.