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Judgment
Dipankar Datta, J.—An order dated 22.3.2010 of the Chairman-cum-Managing Director of the Central Inland Water Transport Corporation Ltd. (hereafter the Corporation) blacklisting the petitioner No. 1 (hereafter the company) in the matter of all commercial transactions including but not limited to charter hire/lease of the corporation''s assets directly and indirectly for a period of five years with immediate effect is the subject matter of challenge in the present petition.
On the date the writ petition was moved, I was of the view that any affidavit from the Corporation is not likely to improve the impugned order which gave a detailed account as to why the order of blacklisting was made. I thus proposed to hear the writ petition without exchange of affidavits to which the parties agreed.
It is not in dispute that a show cause notice dated 9.3.2010 calling upon the company to explain why, for reasons mentioned therein, it shall not be blacklisted and the company''s response to the same by its reply letter dated 19.3.2010 preceded the impugned order of blacklisting. The law declared by the Supreme Court in its decisions reported in Erusian Equipment and Chemicals Ltd. Vs. State of West Bengal and Another, , and Grosons Pharmaceuticals (P) Ltd. and Another Vs. The State of Uttar Pradesh and Others, relied on by Mr. Dutta, learned advocate for the Corporation has thus rightly not been contended on behalf of the petitioners to have been observed in the breach. On the contrary, Mr. Mukherjee, learned senior advocate for the petitioners contended that the impugned order of blacklisting is clearly perverse, malafide and absolutely without jurisdiction having regard to the antecedent facts.
Before considering the rival submissions, I consider it appropriate to give a composite picture of the antecedent facts, in brief, as is revealed from the writ petition leading to the present dispute.
The company claims to be the largest inland water transport operator of inland tankers/barges, working as such transporter for the major public sector undertaking oil companies, over the last four decades, for transportation of petroleum products. It is further claimed that the company by dint of its dedicated and sincere service has acquired considerable goodwill in the trade resulting in such entrustment by the said oil companies.
The Corporation, on 23.7.2004, had floated a tender for the dry charter, inter alia, of a self-propelled oil tanker viz. M.T. Paradip. By an addendum dated 2.9.2004, the Corporation also offered two more self-propelled oil tankers viz. MT Barauni and MT Naharkatia on "as it where is basis".
The company duly participated in the tender process and was declared successful bidders in respect of M.T. Paradip, MT Barauni and MT Naharkatia (hereafter the three vessels). Subsequently, three separate but identical agreements were executed by and between the Corporation and the company on 26.2.2005 for charter of the three vessels. At the time the three vessels were made over to the company, the same were out of commission and without petroleum license. To make the same worthy of being operated on the waterways, the petitioners claim to have incurred substantial sums. MT Paradeep, MT Naharkatia and MT Barauni ultimately started operation from 19.4.2005, 19.5.2005 and 26.9.2005 respectively.
The three vessels were initially taken on hire for a period of two years w.e.f. 26.2.2005 by a time charter with a further stipulation that the period may be extended for a maximum period of eight years.
Since it had taken some time for the three vessels to become worthy of being operated on the waterways and the petitioners had incurred substantial sum in this behalf, they had on 16.11.2006 applied for extension of the period of hire of the three vessels for a further period of six years. However, the Corporation by separate letters dated 30.11.2006 reflecting identical contents refused the prayer for extension without specifying any particular ground.
Despite expiry of the tenure for which the three vessels were hired, the same were not made over to the Corporation since the company had pending contracts to perform and the three vessels were required to be retained and operated. As such, a prayer for extension was again made on 28.5.2007. The tenure of hire charges agreement was initially extended by the Corporation up to 25.5.2007 and then again up to 25.7.2007. However, by its subsequent letters dated 7.8.2007 and 12.7.2007, the Corporation refused to extend the period of hire-charges agreement. Dispute and differences between the parties thus arose.
Refusal of the Corporation to extend the period of the hire-charges agreement was the subject matter of challenge in proceedings initiated by the company u/s 9 of the Arbitration and Conciliation Act, 1996 before the City Civil Court, Calcutta. Initially, ad interim order was passed on 3.9.2007 restraining the Corporation from interfering with the right of the petitioners to use and operate two of the three vessels from Silghat, Assam to Kolkata till 3.10.2007. The said interim order, however, was vacated on 1.10.2007. The petitioners were directed to deliver the three vessels after a joint inspection and survey of the same to be carried out by the registered surveyor in terms of the agreements. The Court, however, directed the Corporation to refer the disputes to arbitration within a period of two months.
In terms of the aforesaid order, the three vessels were handed over to the Corporation between 5.12.2007 and 12.10.2007, without any objection.
Though the Chairman-cum-Managing Director of the Corporation in terms of the separate agreements dated 26.2.2005 was the only authorized person to appoint the arbitrator, he failed and neglected to comply with the direction passed by the Court dated 1.10.2007. However, after lapse of two years, on 29.12.2009 the Corporation appointed Mr. B.K. Bhaumik, ex- Chairman-cum-Managing Director, Hooghly Dock and Board Engineers Ltd., as arbitrator in terms of Clause 36 of the agreements dated 26.2.2005 to adjudicate the disputes between the parties.
It is claimed by the petitioners that till date of presentation of the petition i.e. 31.3.2010, the said arbitrator had not entered upon reference and not a single meeting had been called.
According to the petitioners the arbitrator would be required to decide the following issues:
a) Whether the petitioner No. 1 is entitled to extension and/or renewal of the agreement dated 26th February, 2005?
b) Whether the respondent No. 2 was justified in not extending the period of contract in respect of the three vessels only upto 25th July, 2007?
c) Whether the petitioner is entitled to a sum of Rs. 150.46 lakh as claimed in its letter dated 20th August, 2007?
Following the appointment of the said arbitrator, the Corporation issued a purported letter of demand dated 16.2.2010. For the first time, the Corporation alleged therein that the company would be required to pay Rs. 95,22,038/- on account of deliberate and wilful negligence in handing over the three vessels beyond 25.7.2007.
Close on the heels of the aforesaid demand notice followed the show cause notice dated 9.3.2010 referred to above. The petitioners were alleged to have committed serious misconduct as follows :
i) Gross violation of the terms & conditions of the three agreements all dated 26.02.2005.
ii) Falsification and communication of wrong information to various Government authorities at very high levels with the intention to harm the legitimate interests of CIWTC as well as the reputation of the Corporation and senior officers.
iii) Gross acts of MISTRUST in respect of Government assets worth crores of rupees with the ultimate intention to arrogate these assets unto yourselves.
iv) Suppression and misrepresentation of facts before the Ld. City Civil Court at Calcutta to obtain the orders of injunction, that to ex-parte against CIWTC.
In their response dated 19.3.2010, the petitioners, inter alia, contended as follows:
For reasons best known to you, you chose to terminate our contract which was yielding profits and having taken it over we understand you have not had any income out of the same at present. Such action of yours finally could manage to put the Ministry of Shipping, Government of India into huge losses. However, we reserve our right to know the earnings per month of each vessels till date after taken over from us in October 2007 under Right to Information Act 2005.
You are aware that we have a claim against you to the tune of Rs. 150.56 lacs. Hence the question of your having any claim against us is not only false and fabricated, but the same is being made with a malafide intention.
We fail to understand under what authority you think you can blacklist us. In any event, speaking from past experience, we would not like to do any business with you.
We deny each and every allegation made in the letter under reference and since the matter is subjudice, we would not like to make any comments on your letter under reference.
You action for demanding payment when the matter is subjudice and threatening to "blacklist" us, if not paid, itself goes to prove your malafide intention.
Please note if you take any steps for blacklisting us, we shall be compelled to proceeding in court and shall hold you responsible for all costs and damages.
Upon receiving the petitioners'' response, the Chairman-cum-Managing Director in the impugned memo observed that the misconduct allegedly committed by the petitioners, as extracted supra, had not even been dealt with which conclusively proves admission of the charges levelled. The order contains observations touching the merits of the allegations levelled by the petitioners against the Corporation. The claim of the company against the petitioners in a sum of Rs. 150.56 lakh was denied, being vague and fictitious. Consequently, he directed blacklisting.
Mr. Mukherjee raised a short point. According to him, any dispute and/or difference between the parties arising under the agreements has to be referred to arbitration. The agreements do not empower the Corporation to adjudicate default by the company and to quantify the damage suffered by it, if at all. If the power to recover damages is not expressly provided in the agreement, there is no power of adjudication by the Corporation. Over and above this, the disputes and differences having been referred to an arbitrator for a decision, action of the Chairman-cum-Managing Director to blacklist the company after the arbitrator had been nominated is tainted with malice.
In support of his submission, Mr. Mukherjee relied on the decisions reported in Union of India (UOI) Vs. Raman Iron Foundry, : B.S.N. Joshi and Sons Ltd. Vs. Nair Coal Services Ltd. and Others, B.S.N. Joshi and Sons Ltd. v. Nair Coal Services Ltd.
He, accordingly, prayed for setting aside the order of blacklisting.
Answering the contentions raised by the petitioners, Mr. Datta contended that ''blacklisting'' is a concept essentially providing machinery by which one party decides not to enter into a legal relationship with a party who is untrustworthy. Resort to blacklisting may be taken by a party dehors the contract which may not even provide for the same. A party has no fundamental right to enter into a contract with the State and the State has the right to say that for good grounds it shall not enter into any contract with that party.
Turning to the facts of the case, he contended that the order of blacklisting passed by the Corporation is not related to the agreements executed by and between the parties. It was ordered for proved misconduct committed by the company, allegations in respect whereof were found by the Chairman-cum-Managing Director to have not been even replied to suitably. The decision was taken not to enter into any relationship with the company for the next five years and thereby no jurisdictional error was committed.
He relied on the decisions in Eurasian Equipments Ltd. (supra), Grosons (supra) and AIR 2002 Pat 71: Om Metals and Minerals Ltd. v. The State of Bihar, and Grosons (supra), to buttress his contention that an order of blacklisting cannot be deferred for an indefinite period till proceedings before the arbitrator are concluded since fields of operation are different and the only requirement of law is to adhere to the rule of ''audi alteram partem'' before an order of blacklisting involving civil consequences is passed; that rule having been adhered to in letter and spirit, no judicially enforceable right of the petitioners which is legally protected has been infringed for which the Court of Writ may interfere. He, accordingly, prayed for dismissal of the writ petition.
In reply, Mr. Sen, learned advocate for the petitioners contended that a comparative study of the demand notice dated 16.2.2010 and the show cause notice dated 9.3.2010 would reveal failure of the petitioners to clear the alleged liability in the sum of Rs. 95,22,038/- as the foundation for issuance of the show cause notice. He referred to the order dated 29.12.2009 of the Chairman-cum-Managing Director by which the arbitrator was appointed to adjudicate the disputes in connection with and/or arising out of the agreements dated 26.2.2005 and contended that the Chairman-cum-Managing Director had no authority or competence in terms of the agreements to come to any unilateral conclusion that the petitioners were guilty of causing loss and damage to the Corporation''s interest. According to him, the parties having agreed to a mode of adjudication of disputed claims inter se and an arbitrator having been appointed pursuant to the order of the City Civil Court, the Chairman-cum-Managing Director in proceeding to take upon himself the duty of adjudicating that the company had committed breach of its obligations and, therefore, was liable to pay Rs. 95,22,038/-, in default to suffer an order of blacklisting, has clearly acted malafide and arbitrarily, and has misused his position with the view to harm the petitioners.
I have heard the parties and considered the materials on record.
For the purpose of a decision on this petition, it would be essential to consider as to whether the tender terms and conditions or the agreements between the parties conferred any power on the Corporation to adjudicate in respect of alleged loss and damage suffered by it by reason of breach of agreement committed by the company and to quantify and recover damages from the company. Mr. Dutta could not invite my attention to any such Clause either in the tender documents or in the agreements. The contention of the petitioners that no such power exists has to be accepted in the circumstances. On the authority of the decisions in Raman Iron Foundry (supra) to the extent not overruled in H.M. Kamaluddin Ansari and Co. Vs. Union of India (UOI) and Others, and Shri Surendra Kumar Roy Chowdhury (supra), I see no reason how the Chairman-cum-Managing Director of the Corporation could assume jurisdiction to quantify damage.
True it is that to blacklist a party, it is not always necessary that such power must be traceable in the agreement between the parties. A party may be blacklisted for diverse variable factors, not capable of being foreseen at the time the parties reach an agreement. But having regard to the drastic consequences that might follow an order of blacklisting being passed, it is all the more necessary that the same should be passed only if the circumstances unmistakably so warrant and with utmost care and circumspection.
Based on the decisions cited by him, Mr. Dutta sought to contend that ''audi alteram partem'' rule having been adhered to, the decision is not subject to judicial review. I do not consider it to be the law that an order of blacklisting is not open to challenge simply because the party who is put on the black-list is given prior opportunity to represent against the proposed action. The order of blacklisting remains an administrative order despite affording of opportunity to raise defence to such party in keeping with principles of natural justice; but propriety and/or legality and/or validity thereof may be questioned on recognized grounds based whereon judicial review of administrative action is permissible. I shall, therefore, now proceed to consider as to whether the process of decision making leading to the ultimate order of blacklisting, impugned herein, suffers from any of the vices to attract judicial review or not.
The Chairman-cum-Managing Director observed that the petitioners did not offer any explanation in respect of the misconduct alleged to have been committed by them, as enumerated in paragraph 10 of the show cause notice.
In so far as misconduct listed against Sl. Nos. (i) and (iii) are concerned, the same cannot but be directly relatable to the terms and conditions of the three agreements dated 22.6.2005 executed by and between the parties. Whether or not the company is entitled to succeed in its claim of Rs. 150.56 lakh or the Corporation would succeed in its counter claim of Rs. 95,22,038/-, recently raised, are matters to be considered and adjudicated by the arbitrator. If at all the company is held guilty of breach of obligations, it must bear the consequences of the arbitrator''s award unless the same is upset by the competent forum on proceedings initiated against it. On the contrary, at this stage, possibility of the company succeeding in its claim before the arbitrator cannot be totally ruled out. In the event the company succeeds ultimately before the arbitrator but the order of blacklisting is allowed to operate for the full period for which it is to subsist, the company would be deprived of the opportunity of entering into further contracts with the Corporation. Not only that, this order of blacklisting would bear civil consequence insofar as contracts the company may wish to execute with other parties in future. Its goodwill in the market is sure to take a beating having regard to the implications of the order of blacklisting. In such circumstances, consideration of the alleged misconduct specified against Sl. Nos. (i) and (iii) of paragraph 10 of the show cause notice in support of passing the impugned order of blacklisting, in my considered view, is an act of utter unfairness as well as unreasonableness, not otherwise justifiable. The Chairman-cum-Managing Director while acting as Judge of his own cause encroached into a domain reserved for adjudication by the arbitrator and, therefore, rendered the impugned order vulnerable.
So far as the allegation of misconduct enumerated against Sl. No. (iv) of paragraph 10 of the show cause notice is concerned, I am of the further considered view that the Chairman-cum-Managing Director misdirected himself in treating the same to be good ground for blacklisting the company. Proceedings before the City Civil Court at Calcutta initiated by the company being judicial proceedings, it would have been necessary for the Chairman-cum-Managing Director to refer to any order of the Court holding that the company is guilty of suppression of facts and/or misrepresentation of facts thereby enabling it to mislead the Court and to obtain ex parte order of injunction. No such order has been referred to in the impugned order of blacklisting. I have perused the order dated 1.10.2007 passed by the learned Judge, City Civil Court at Calcutta in Misc. Case No. 4738/2007. Contention raised on behalf of the Corporation by its learned advocate that the company was guilty of gross suppression of material facts was recorded. However, no finding appears to have been given on such contention except that the company having failed to deliver the vessels in favour of the Corporation after expiry of the extended date had failed to perform its contractual obligation. The Chairman-cum-Managing Director, therefore, could not have acted as a judge of his own cause and on unilateral appreciation of the issue hold the company to be guilty of suppression and/or misrepresentation of facts when the concerned Court did not uphold his objection. In the absence of the Civil Court having held that the company was guilty of suppression and/or misrepresentation of facts, the Chairman-cum-Managing Director exceeded his jurisdiction by ordering blacklisting on such ground.
It is only the misconduct listed against Sl. No. (ii) that might provide ground for ordering blacklisting, if at all. It is not known to what extent misconduct enumerated against Sl. Nos. (i), (iii) and (iv) influenced the mind of the Chairman-cum-Managing Director in ordering the company to be put on the blacklist. It would be inappropriate to invoke the doctrine of severability to sustain the impugned order of blacklisting merely on the basis of misconduct as in Sl. No. (ii) of paragraph 10 of the show cause notice.
Tested on the doctrine of fairness, implying a duty to act fairly, as well as on principles of natural justice, both of which are intended to ensure the rule of law and to prevent failure of justice, the impugned order cannot sustain in law.
In the result, the order of blacklisting stands set aside. The writ petition stands allowed.
It shall, however, be open to the Corporation to proceed afresh against the petitioners in respect of allegations not arising out of their respective actions in pursuance of the agreements dated 26.2.2005, strictly in accordance with law.
There shall be no order as to costs.
Urgent photostat certified copy of the judgment and order shall be given to the applicants, if applied for, as early as possible.