UMC TECHNOLOGIES PRIVATE LIMITED versus FOOD CORPORATION OF INDIA AND ANR.

Citation: [2020] 13 S.C.R. 1175 · Decided: 16-11-2020 · Supreme Court of India · Bench: S. ABDUL NAZEER, BHUSHAN RAMKRISHNA GAVAI · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · cites 3 · see the full citation network in Lexace

Judgment (excerpt)

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UMC TECHNOLOGIES PRIVATE LIMITED
v.
FOOD CORPORATION OF INDIA AND ANR.
(Civil Appeal No. 3687 of 2020)
NOVEMBER 16, 2020
[S. ABDUL NAZEER AND B. R. GAVAI, JJ.]
Contract – Termination of – Blacklisting by Corporation –
The Corporation had issued a Bid Document inviting bids for
appointment of a recruitment agency to conduct the process or
recruitment for hiring watchmen – The appellant was declared as
the successful bidder – The appellant conducted a written exam for
eligible aspirants for the post of watchmen with the Corporation –
On the same day a Special Task Force of Police arrested 50 persons,
who were in possession of certain handwritten documents which
prima facie appeared to be the question papers related to the
examination conducted by the appellant – The Corporation issued
a show cause notice dated 10.04.2018 to the appellant and alleged
that the appellant had breached various clauses of the Bid document
– By its order dated 09.01.2019, the Corporation concluded that
the shortcomings/negligence on part of the appellant stood
established beyond any reasonable doubt and proceeded to terminate
its contract with the appellant and also blacklisted the appellant
from participating in any future tenders of the Corporation for a
period of 5 years – Writ petition filed by the appellant before the
High Court was dismissed – Before the Supreme Court, the appellant
submitted that it only seeks to contest the issue of blacklisting and
not the termination of the contract between the appellant and the
Corporation – Held: A prior show cause notice granting a
reasonable opportunity of being heard is an essential element of all
administrative decision-making and particularly so in decisions
pertaining to blacklisting which entail grave consequences for the
entity being blacklisted – In these cases, furnishing of a valid show
cause notice is critical and a failure to do so would be fatal to any
order of blacklisting pursuant thereto – A show cause notice must
spell out clearly, or its contents be such that it can be clearly inferred
therefrom, that there is intention on the part of the issuer of the
notice to blacklist the noticee – In the instant case, the show cause
[2020] 13 S.C.R. 1175
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SUPREME COURT REPORTS
[2020] 13 S.C.R.
notice makes it clear that the action of blacklisting was neither
expressly proposed nor could it have been inferred from the language
employed by the Corporation in its show cause notice – It was
incumbent on the part of the Corporation to clarify in the show
cause that it intended to blacklist the appellant, so as to provide
adequate and meaningful opportunity to the appellant to show cause
against the same – Therefore, the show cause notice dated
10.04.2018 does not fulfil the requirements of a valid show cause
notice for blacklisting – The Corporations’s order dated 09.01.2019
is quashed only so far as it blacklist the appellant from participating
in future tenders.
Allowing the appeal, the Court
HELD: 1. In the context of blacklisting of a person or an
entity by the state or a state corporation, the requirement of a
valid, particularized and unambiguous show cause notice is
particularly crucial due to the severe consequences of blacklisting
and the stigmatization that accrues to the person/entity being
blacklisted. Here, it may be gainful to describe the concept of
blacklisting and the graveness of the consequences occasioned
by it. Blacklisting has the effect of denying a person or an entity
the privileged opportunity of entering into government contracts.
This privilege arises because it is the State who is the
counterparty in government contracts and as such, every eligible
person is to be afforded an equal opportunity to participate in
such contracts, without arbitrariness and discrimination. Not only
does blacklisting takes away this privilege, it also tarnishes the
blacklisted person’s reputation and brings the person’s character
into question. Blacklisting also has long-lasting civil
consequences for the future business prospects of the blacklisted
person. [Para 14][1183-E-H; 1184-A]
2. In light of the various Supreme Court decisions, it is
clear that a prior show cause notice granting a reasonable
opportunity of being heard is an essential element of all
administrative decision-making and particularly so in decisions
pertaining to blacklisting which entail grave consequences for
the entity being blacklisted. In these cases, furnishing of a val

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