Rishi Builders INDIA PVT. LTD. vs. The State Of Bihar

Held

The Court held that the show-cause notice issued to the petitioner was incomplete and violated the principles of natural justice because it failed to indicate the contemplated action, specifically the proposed blacklisting for ten years. Citing Gorkha Security Services, the Court emphasized that a show-cause notice must state both the material grounds for action and the particular penalty proposed. The absence of this information prejudiced the petitioner's ability to make an effective representation. The Court also found the duration of ten years for blacklisting to be excessively harsh and disproportionate, referencing observations in Vetindia Pharmaceutical Ltd. and other Supreme Court judgments that such long periods can have immeasurable evil consequences and are often unsustainable. Consequently, the Court quashed the order of blacklisting dated January 27, 2020. The Court directed the respondent to issue a fresh show-cause notice to the petitioner, clearly stating the proposed course of action and providing the documents relied upon. The petitioner was granted four weeks to reply, and the respondent was directed to pass a reasoned final order within a further four weeks, considering the entire matter. The recovery of excess payment was implicitly stayed pending the fresh decision.

Facts

The petitioner, Rishi Builders India Pvt. Ltd., a Class-I contractor, challenged an order dated January 27, 2020, passed by the Engineer-in-Chief, Road Construction Department, Government of Bihar. This order blacklisted the petitioner for ten years and directed recovery of excess payments allegedly made for unexecuted work. The petitioner was initially issued a notice on August 6, 2019, regarding anomalies found by a Flying Squad. The petitioner requested documents, including the Flying Squad report, which were not provided. A Special Committee analyzed the Flying Squad report and recommended action. Subsequently, a memo of charge with six charges was framed, and a show-cause notice was issued. The petitioner replied, reiterating work completion but requesting documents. The respondents deemed the reply unsatisfactory, citing excess payments for carriage and VAT/GST without proper vouchers. The petitioner argued the notice did not specify the contemplated action, the Flying Squad report was withheld, and the ten-year blacklisting was excessive.

Key Issues

1. Whether the show-cause notice issued to the petitioner was complete and complied with the principles of natural justice, specifically regarding the indication of the contemplated action, as required by the Supreme Court in Gorkha Security Services v. Government (NCT of Delhi) & Ors. (2014) 9 SCC 105? 2. Whether the duration of blacklisting for ten years was disproportionate and excessive, considering the alleged anomalies and the principles laid down in cases like Vetindia Pharmaceutical Ltd. v. State of Uttar Pradesh & Anr. (2020 SCC OnLine SC 912)? Petitioner's arguments: The petitioner contended that the show-cause notice was deficient as it did not inform them of the specific action contemplated (blacklisting for ten years), thus preventing an effective representation. They also argued that the Flying Squad report, crucial for their defense, was never furnished. Furthermore, they asserted that blacklisting for ten years was excessively harsh and disproportionate to the alleged irregularities. Respondent's arguments: The respondent-State argued that the relevant records showed inconsistencies between work done and measurement book entries. They stated that a show-cause notice was issued on August 6, 2019, followed by a reminder, and later a second show-cause notice incorporating the Special Technical Committee's findings, including excess payment for VAT/GST. They also raised a preliminary objection that the order of blacklisting was appealable under Rule 11(d) of the Bihar Contractors Registration Rules, 2007, suggesting the petitioner should have filed an appeal instead of approaching the High Court directly.