ERUSIAN EQUIPMENT & CHEMICALS LTD. versus STATE OF WEST BENGAL & ANR.

Citation: [1975] 2 S.C.R. 674 · Decided: 11-11-1974 · Supreme Court of India · Bench: A.N. RAY · Disposal: Dismissed

Cited by 18 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

ERUSIAN EQUIPMENT & CHEMICALS LTD. 
v. 
STATE OF WEST BENGAL & ANR. 
November 11, 1974 
[A. N. RAY, C.J., K. K. MATHEW AND N. L. UNTWALIA, JJ.]" 
Constitutio11 of brdia, 1950, Art. 14-.Black listing of contractors .without 
opportunity to shdw cause-Validity. 
1 Certain persons engaged in the business of purchase export of Cinchona pro· 
ducts, and others who were on the approved list of the Director General, Supplies 
and Disposals, were put on· the black list by the Government, because, Govern· 
men! had information that they were indulging in some malpractices. 
On the question whether they were entitled to a notice to be heard, before 
they were put on the black list, 
HELD : (I) Under Art. 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 
JUlY purpose. The State can carry on· executive function by making a law or 
without malting a law. The exercise of such powers and functions in trade by 
the State is subject to Part Ill of the Constitution. Article 14 speaks of equality 
before the law and equal protection of the laws. Equality of opportunity applies 
to matters of public contracts, The State need not enter into any contract with 
anyone but if it does, it must do so fairly. without dicrimination and without 
unfair procedure. No one has any right to .enter into a contract with the Govern· 
men! bµt everyone is entitled to equal treatment with others who offer tenders 
or quotations for the purchase of goods. This privilege arises because it is the 
Government which is trading wilh the public, and the democratic 
form 
of 
Government demands equality and absence of arbitrariness and discrimination 
in such transactions. The activities of the Government have a public element 
and, therefore, there should be fairness and equality. [677C-E, G; 6780-E} 
(2) A body may be under a duty to give fair consideration to the facts aM 
to consider the representation but not to 4isclose details of information in its pos· 
session. So'lltetlmes the duty to act fairly can also be sustained without providing 
opportunity for an oral bearing. It _will depend upon the nature of the interest 
affected, and the circumstances in which the power is exercised ·and the nature of 
sanctions involved therein. [678H-679B] 
(3) Exclusion of a member of the pul)lic from dealing With a State in sales 
transactions has the effect of preventing him from purchasing and doing a laWful 
trade in gOQds by discriminating against him in favour of other people. 
The 
State·can impose reasonable conditions regarding rejection and acceptance of bids 
or qualificlltft:>ns of bidders. Just as an exclusion of the lowest tender will be 
arbitrary; similarly exclusion of a person. who offers the highest price from parti-
cipating in a public auction would also have the same aspect of arbitrariness. 
[678F·Gl 
( 4) Biack listing has the effect of preventing a person from the privilege and 
advantage of entering into lawful relationship with the Government for purposes 
of gain. A person who is on the approved list is unable to enter into advantage• 
ous relations with the Government because of the order of black listing. 
A 
person who has been dealing with the Government in the matter of sale and pUr· 
chase of materials baa a legitimate interest or expectation. Black listing tami•hes 
one's reputation and reputation is a part of person's -character and personality. 
The fact that a disabill11y i~ created by the order of black listing indicates that the 
relevant autl1orlty is to have an objective satisfaction. Fundamentals of fair play 
require that the person concemed should be given an opoortunity to represi:nt his 
case before he is put on tho black list. 
[678PrF; 679B·CJ 
A 
B 
c 
D 
E 
F 
G 
H 
ERUSIAN EQUIPMENT V. WEST BENGAL (Ray, Cf) 
675 
A 
ORIGINAL JURISDICTION : Writ Petitions Nos. 34 of 1974 and 959 
of 1973. 
D 
c 
D 
E 
F 
H 
Petition under Art. 32 of the Constitution of India and 
Civil Appeal No. 318 of 1974. 
From the judgment and order dated the 15th September 1973 of 
the Bombay. High Court in Appeal No. 38 of 1973. 
. 
D. C. Singhania, C. N. Murthy, (In W.P. No. 34/74), Madan 
Bhatia and Shiv Khorana, (In W.P. No. 959/73) and M. K. Garg, 
for the petitioners (In W.P. No._34/74 & 959/7~). 
B .. s_en, D. N. Mukherjee, Sukumar Basu and G. S. Chatterjee, for 
the respondents (In W.

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