UMC TECHNOLOGIES PRIVATE LIMITEDversusFOOD CORPORATION OF INDIA AND ANR.

                         [2020] 13 S.C.R. 1175                               1175


           UMC TECHNOLOGIES PRIVATE LIMITED                                  A
                                    v.
          FOOD CORPORATION OF INDIA AND ANR.
                    (Civil Appeal No. 3687 of 2020)
                          NOVEMBER 16, 2020                                  B
           [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              C
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                D
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           E
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        F
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        G
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
                                                                             H
                                  1175
1176            SUPREME COURT REPORTS                       [2020] 13 S.C.R.


 A     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
 B
       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.
 C           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
 D     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.
 E     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
 F     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
 G     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
 H     to any order of blacklisting pursuant thereto. [Para 19][1186-B-
       C]
UMC TECHNOLOGIES PRIVATE LIMITED v. FOOD CORPORATION 1177
                 OF INDIA AND ANR.

      3. The legal position is clear that for a show cause notice to     A
constitute the valid basis of a blacklisting order, such 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. Such a clear notice is
essential for ensuring that the person against whom the penalty
                                                                         B
of blacklisting is intended to be imposed, has an adequate,
informed and meaningful opportunity to show cause against his
possible blacklisting. [Para 21][1187-E-F]
       4. A plain reading of the 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           C
its show cause notice. After listing 12 clauses of the “Instruction
to Bidders”, which were part of the Corporation’s Bid Document
dated 25.11.2016, the notice merely contains a vague statement
that in light of the alleged leakage of question papers by the
appellant, an appropriate decision will be taken by the                  D
Corporation. [Para 24][1188-G-H]
        5. The mere existence of a clause in the Bid Document,
which mentions blacklisting as a bar against eligibility, cannot
satisfy the mandatory requirement of a clear mention of the
proposed action in the show cause notice. The Corporation’s              E
notice is completely silent about blacklisting and as such, it could
not have led the appellant to infer that such an action could be
taken by the Corporation in pursuance of this notice. Had the
Corporation expressed its mind in the show cause notice to black
list, the appellant could have filed a suitable reply for the same.
Therefore, this Court is of the opinion that the show cause notice       F
dated 10.04.2018 does not fulfil the requirements of a valid show
cause notice for blacklisting. In view of this Court, the order of
blacklisting the appellant clearly traversed beyond the bounds of
the show cause notice which is impermissible in law. As a result,
the consequent blacklisting order dated 09.01.2019 cannot be             G
sustained. [Para 25][1189-D-F]
      Erusian Equipment & Chemicals Ltd. v. State of West
      Bengal (1975) 1 SCC 70 : [1975] 2 SCR 674;
      Raghunath Thakur v. State of Bihar (1989) 1 SCC 229
      : [1988] 3 Suppl. SCR 867; Gorkha Security Services                H
1178             SUPREME COURT REPORTS                          [2020] 13 S.C.R.


 A           v. Government (NCT of Delhi) and Ors. (2014) 9 SCC
             105 : [2014] 13 SCR 617 – relied on.
             Nasir Ahmad v. Assistant Custodian General, Evacuee
             Property, Lucknow and Anr. (1980) 3 SCC 1 : [1980]
             3 SCR 248 – referred to.
 B                              Case Law Reference
       [1980] 3 SCR 248                       referred to           Para 13
       [1975] 2 SCR 674                       relied on             Para 16
       [1988] 3 Suppl. SCR 867                relied on             Para 17
 C
       [2014] 13 SCR 617                      relied on             Para 18
             CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3687
       of 2020.
            From the Judgment and Order dated 13.02.2019 of the High Court
 D     of Madhya Pradesh at Jabalpur in W.P. No. 2778 of 2019.
              Gourab Banerji, Sr. Adv., Sahil Tagotra, Subhro Mukherjee, Mohit
       Pandey, Ms. Ishita Mishra, Ajit Pudussery, Advs. for the appearing
       parties.
             The Judgment of the Court was delivered by
 E
             S. ABDUL NAZEER, J.
             1. Leave granted.
              2. This appeal is directed against the order dated 13.02.2019 passed
       by the High Court of Madhya Pradesh at Jabalpur in Writ Petition No.
 F     2778 of 2019. By the impugned order, the High Court has dismissed the
       writ petition and has upheld the validity of the order dated 09.01.2019
       passed by respondent no.1, namely Food Corporation of India (for short
       ‘the Corporation’) through its Deputy General Manager (Personnel),
       who is respondent no. 2 herein, to terminate a contract of service with
       the appellant and to blacklist the appellant from participating in any future
 G
       tenders of the Corporation for a period of 5 years.
              3. The Corporation had issued a Bid Document on 25.11.2016
       inviting bids for appointment of a recruitment agency to conduct the
       process of recruitment for hiring watchmen for the Corporation’s office.
       The appellant submitted its bid on 21.12.2016 and was eventually declared
 H
UMC TECHNOLOGIES PRIVATE LIMITED v. FOOD CORPORATION 1179
       OF INDIA AND ANR. [S. ABDUL NAZEER, J.]

as the successful bidder vide the Corporation’s letter dated 28.03.2017.         A
After completion of the formalities, the appellant was appointed for a
period of 2 years w.e.f. 14.02.2017 for undertaking the tendered work
of conducting recruitment of watchmen for the Corporation.
       4. As part of its work, on 01.04.2018, the appellant conducted a
written exam for eligible aspirants for the post of watchman with the            B
Corporation at various centres in Madhya Pradesh. On the same day, a
Special Task Force of Bhopal Police arrested 50 persons in Gwalior,
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 police filed a charge sheet on 03.08.2018
against certain persons. Upon receipt of the above information, the              C
Corporation issued a show cause notice dated 10.04.2018 to the appellant
informing the appellant about the said arrest and seizure of documents
which appeared to contain question papers related to the examination
conducted by the appellant. This notice alleged that the appellant had
breached various clauses of the Bid Document dated 25.11.2016 on the             D
ground that it was the sole responsibility of the appellant to prepare and
distribute the question papers as well as conduct the examination in a
highly confidential manner. Several clauses of the Bid Document were
listed in the said notice dated 10.04.2018 and the Corporation alleged
that the appellant had violated the same due to its abject failure and
clear negligence in ensuring smooth conduct of the examination. The              E
said notice directed the appellant to furnish an explanation within 15
days, failing which an appropriate ex-parte decision would be taken by
the Corporation.
        5. The appellant replied to the aforesaid notice vide its letter dated
12.04.2018 denying any negligence or leak of question papers from its            F
end. In its communication, the appellant furnished several factual
justifications in support of its position and also requested the Corporation
to make the documents seized by the police available to the appellant for
forensic analysis. These documents were provided to the appellant vide
the Corporation’s letter dated 18.10.2018. The Corporation addressed             G
another letter dated 22.10.2018 calling upon the appellant to submit its
final reply/explanation. Thereafter, on 27.10.2018, the appellant submitted
an Observation Report-cum-Reply/Explanation which compared the
seized documents with the original question papers and contended that
there were many dissimilarities between the two and thus there had
been no leakage or dissemination of the original question papers.                H
1180            SUPREME COURT REPORTS                         [2020] 13 S.C.R.


 A            6. By its aforesaid 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. Further, the appellant’s security deposit with the Corporation was
 B
       forfeited and the appellant was directed to execute the unexpired portion
       of the contract at its own cost and risk.
               7. Aggrieved by the above order of the Corporation, the appellant,
       after issuing a legal notice, filed Writ Petition No. 2778 of 2019 before
       the High Court. This petition came to be dismissed by the High Court’s
 C     aforesaid order dated 13.02.2019 which is under challenge before us.
              8. At the outset, it may be noted that Shri Gourab Banerji, learned
       senior counsel for the appellant, has submitted that the appellant only
       seeks to contest the issue of blacklisting and not the termination of the
       contract between the appellant and the Corporation. Thus, the sole issue
 D     that falls for determination before us is whether the Corporation was
       entitled to and justified in blacklisting the appellant for 5 years from
       participating in its future tenders.
              9. Before delving into the contentions of the parties, it would be
       useful to extract some of the provisions of the Corporation’s Bid
 E     Document dated 25.11.2016 which would be material to determining the
       validity of the blacklisting order dated 09.01.2019:
                            “INSTRUCTIONS TO BIDDERS
                        XXX              XXX              XXX
 F           10. DISQUALIFICATION CONDITIONS: Bidder who have
             been blacklisted or otherwise debarred by FCI or central/
             state Govt. or any central/ State PSU / Statutory Corporations,
             will be ineligible during the period of such blacklisting.
             10.1 Any Bidder whose contract with FCI or central/state
 G           Govt. or any central/State PSU/Statutory Corporations has
             been terminated before the expiry of the contract period for
             breach of any terms and conditions at any point of time during
             the last five years, shall be ineligible.
             10.2 Bidder whose Earnest Money Deposit and/or Security
 H           Deposit have been forfeited by the FCI or central/state Govt.
UMC TECHNOLOGIES PRIVATE LIMITED v. FOOD CORPORATION 1181
       OF INDIA AND ANR. [S. ABDUL NAZEER, J.]

    or any central/State PSU/Statutory Corporations, during the        A
    last five years, for breach of any terms and conditions, shall
    be ineligible.
             XXX              XXX             XXX
    25. CORRUPT PRACTICES:
                                                                       B
    …
    25.4 Any corrupt practice indulged by the agency or any of
    its employee at any of the stages of the recruitment including
    preparation of the question paper, distribution of question
    paper, conducting of the exams, valuation of the answer            C
    sheets, declaration of results etc. shall lead to immediate
    cancellation of the contact and the agency shall be liable for
    appropriate legal action without prejudice to any other clause
    in the contract.
             XXX              XXX             XXX                      D
    42. TERMINATION OF CONTRACT:
    42.1 By Corporation
    …
    (ii) The FCI shall also have, without prejudice to other rights    E
    and remedies, the right in the event of breach by the Bidder
    of any of the terms and conditions of the contract, or failing
    to observe any of the provisions, obligations governing the
    contract, to terminate the contract forthwith and to get the
    work done for the unexpired period of the contract at the
    risk and cost of the Agency and to forfeit the Security Deposit    F
    or any part thereof for recovery of all losses, damages, costs
    and expenses which may be incurred by FCI consequent to
    such termination and / or in completing the assignment. FCI
    may also effect recovery from other sums then due to the
    Agency or which at any time thereafter may become due under        G
    this or any other contract with FCI. In case the sum is not
    sufficient to cover the full amounts recoverable, the Agency
    shall pay FCI on demand the entire remaining balance due.
    (iii) FCI may at any time without assigning any reason
    terminate the contract without any liability by giving 7 working   H
    days’ notice to the bidder.”
1182             SUPREME COURT REPORTS                            [2020] 13 S.C.R.


 A            10. On behalf of the appellant, it was submitted by Shri Banerji
       that the Corporation had no power under the above quoted or any other
       provisions of the Bid Document dated 25.11.2016 to blacklist the appellant.
       It was argued that above quoted Clause 10 titled “Disqualifications
       Conditions”, which has been relied upon by the Corporation, merely lays
       down eligibility criteria and does not grant any power of future blacklisting.
 B
       It was further alleged that the said clause was also not mentioned in the
       show cause notice dated 10.04.2018 issued by the Corporation. The
       said show cause notice was also impinged upon by the appellant by
       submitting that it failed to meet the requirements of natural justice as it
       neither mentioned the grounds necessitating action nor specified what
 C     actions were proposed to be taken. Thus, Shri Banerji submitted that in
       the absence of a valid show cause notice, the consequent blacklisting
       order cannot be sustained. He further highlighted the outsized impact of
       the Corporation’s impugned order on the appellant in as much as the
       Corporation’s branches in other States as well as other government
       corporations have now issued as many as 5 notices to the appellant to
 D
       cancel contracts or prevent the appellant from participating in their tender
       process and have also forfeited or withheld outstanding payments and
       security deposits. He argued that due to the domino effect of the
       Corporation’s blacklisting of the appellant, the appellant has unreasonably
       suffered 5 punishments at the hands of the Corporation which is
 E     disproportionate and tantamounts to the civil death of the appellant.
               11. On the other hand, Shri Ajit Pudussery, the learned counsel
       appearing on behalf of the Corporation argued that due to the negligence
       of the appellant, the entire recruitment process had to be scrapped and
       the same has deprived several applicants of employment and undermined
 F     the confidence of the public in the recruitment process of the Corporation.
       In relation to the issue of blacklisting, he submitted that since the appellant
       had breached the terms of the contract by leaking the question papers
       for the examination, it was not in public interest to permit it to participate
       in future tenders. He further submitted that the appellant must have
       been aware of the possibility of the punishment of blacklisting as the
 G     same was provided for in the Bid Document. Thus, it was argued that
       since the blacklisting order was made as per the Bid Document and
       after issuance of a show cause notice, to which the appellant was granted
       ample time to reply to, the Corporation’s impugned blacklisting order
       dated 09.01.2019 cannot be challenged.
 H
UMC TECHNOLOGIES PRIVATE LIMITED v. FOOD CORPORATION 1183
       OF INDIA AND ANR. [S. ABDUL NAZEER, J.]

      12. We have given our anxious consideration to the submissions           A
made by the learned counsel at the Bar on behalf of the parties. In our
opinion, the validity of the impugned order of the Corporation dated
09.01.2019, so far as the blacklisting of the appellant thereunder is
concerned, would in turn be determined by the validity of the underlying
show cause notice dated 10.04.2018 issued by the Corporation to the
                                                                               B
appellant.
       13. At the outset, it must be noted that it is the first principle of
civilised jurisprudence that a person against whom any action is sought
to be taken or whose right or interests are being affected should be
given a reasonable opportunity to defend himself. The basic principle of
natural justice is that before adjudication starts, the authority concerned    C
should give to the affected party a notice of the case against him so that
he can defend himself. Such notice should be adequate and the grounds
necessitating action and the penalty/action proposed should be mentioned
specifically and unambiguously. An order travelling beyond the bounds
of notice is impermissible and without jurisdiction to that extent. This       D
Court in Nasir Ahmad v. Assistant Custodian General, Evacuee
Property, Lucknow and Anr.,1 has held that it is essential for the notice
to specify the particular grounds on the basis of which an action is
proposed to be taken so as to enable the noticee to answer the case
against him. If these conditions are not satisfied, the person cannot be
said to have been granted any reasonable opportunity of being heard.           E

       14. Specifically, 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   F
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        G
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
1
    (1980) 3 SCC 1.                                                            H
1184                SUPREME COURT REPORTS                      [2020] 13 S.C.R.


 A     long-lasting civil consequences for the future business prospects of the
       blacklisted person.
               15. In the present case as well, the appellant has submitted that
       serious prejudice has been caused to it due to the Corporation’s order of
       blacklisting as several other government corporations have now
 B     terminated their contracts with the appellant and/or prevented the
       appellant from participating in future tenders even though the impugned
       blacklisting order was, in fact, limited to the Corporation’s Madhya
       Pradesh regional office. This domino effect, which can effectively lead
       to the civil death of a person, shows that the consequences of blacklisting
       travel far beyond the dealings of the blacklisted person with one particular
 C     government corporation and in view thereof, this Court has consistently
       prescribed strict adherence to principles of natural justice whenever an
       entity is sought to be blacklisted.
              16. The severity of the effects of blacklisting and the resultant
       need for strict observance of the principles of natural justice before
 D     passing an order of blacklisting were highlighted by this Court in Erusian
       Equipment & Chemicals Ltd. v. State of West Bengal2 in the following
       terms:
                 “12. … The order of blacklisting has the effect of depriving a
                 person of equality of opportunity in the matter of public
 E               contract. A person who is on the approved list is unable to
                 enter into advantageous relations with the Government
                 because of the order of blacklisting. A person who has been
                 dealing with the Government in the matter of sale and
                 purchase of materials has a legitimate interest or expectation.
 F               When the State acts to the prejudice of a person it has to be
                 supported by legality.
                              XXX         XXX              XXX
                 15. … The blacklisting order involves civil consequences. It
                 casts a slur. It creates a barrier between the persons
 G               blacklisted and the Government in the matter of transactions.
                 The black lists are instruments of coercion.
                              XXX         XXX              XXX


 H     2
           (1975) 1 SCC 70.
UMC TECHNOLOGIES PRIVATE LIMITED v. FOOD CORPORATION 1185
       OF INDIA AND ANR. [S. ABDUL NAZEER, J.]

         20. Blacklisting has the effect of preventing a person from           A
         the privilege and advantage of entering into lawful
         relationship with the Government for purposes of gains. The
         fact that a disability is created by the order of blacklisting
         indicates that the relevant authority is to have an objective
         satisfaction. Fundamentals of fair play require that the person
                                                                               B
         concerned should be given an opportunity to represent his
         case before he is put on the blacklist.”
       17. Similarly, this Court in Raghunath Thakur v. State of Bihar,3
struck down an order of blacklisting for future contracts on the ground
of non-observance of the principles of natural justice. The relevant extract
of the judgement in that case is as follows:                                   C

         “4. … [I]t is an implied principle of the rule of law that any
         order having civil consequences should be passed only after
         following the principles of natural justice. It has to be realised
         that blacklisting any person in respect of business ventures
         has civil consequence for the future business of the person           D
         concerned in any event. Even if the rules do not express so, it
         is an elementary principle of natural justice that parties
         affected by any order should have right of being heard and
         making representations against the order.”
       18. This Court in Gorkha Security Services v. Government (NCT           E
of Delhi) and Ors.4 has described blacklisting as being equivalent to the
civil death of a person because blacklisting is stigmatic in nature and
debars a person from participating in government tenders thereby
precluding him from the award of government contracts. It has been
held thus:                                                                     F
         “16. It is a common case of the parties that the blacklisting
         has to be preceded by a show-cause notice. Law in this regard
         is firmly grounded and does not even demand much
         amplification. The necessity of compliance with the principles
         of natural justice by giving the opportunity to the person            G
         against whom action of blacklisting is sought to be taken has
         a valid and solid rationale behind it. With blacklisting, many
         civil and/or evil consequences follow. It is described as “civil
3
    (1989) 1 SCC 229.
4
    (2014) 9 SCC 105.                                                          H
1186             SUPREME COURT REPORTS                          [2020] 13 S.C.R.


 A           death” of a person who is foisted with the order of blacklisting.
             Such an order is stigmatic in nature and debars such a person
             from participating in government tenders which means
             precluding him from the award of government contracts.”
              19. In light of the above decisions, it is clear that a prior show
 B     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.
 C
               20. In the present case, the factum of service of the show cause
       notice dated 10.04.2018 by the Corporation upon the appellant is not in
       dispute. Rather, what Shri Banerji has argued on behalf of the appellant
       is that the contents of the said show cause notice were not such that the
       appellant could have anticipated that an order of blacklisting was being
 D     contemplated by the Corporation. Gorkha Security Services (supra) is
       a case where this Court had to decide whether the action of blacklisting
       could have been taken without specifically proposing/contemplating such
       an action in the show-cause notice. For this purpose, this Court laid
       down the below guidelines as to the contents of a show cause notice
 E     pursuant to which adverse action such as blacklisting may be adopted:
             “Contents of the show-cause notice
             21. The central issue, however, pertains to the requirement of
             stating the action which is proposed to be taken. The
             fundamental purpose behind the serving of show-cause notice
 F           is to make the noticee understand the precise case set up
             against him which he has to meet. This would require the
             statement of imputations detailing out the alleged breaches
             and defaults he has committed, so that he gets an opportunity
             to rebut the same. Another requirement, according to us, is
 G           the nature of action which is proposed to be taken for such a
             breach. That should also be stated so that the noticee is able
             to point out that proposed action is not warranted in the given
             case, even if the defaults/breaches complained of are not
             satisfactorily explained. When it comes to blacklisting, this
             requirement becomes all the more imperative, having regard
 H           to the fact that it is harshest possible action.
UMC TECHNOLOGIES PRIVATE LIMITED v. FOOD CORPORATION 1187
       OF INDIA AND ANR. [S. ABDUL NAZEER, J.]

      22. The High Court has simply stated that the purpose of show-           A
      cause notice is primarily to enable the noticee to meet the
      grounds on which the action is proposed against him. No
      doubt, the High Court is justified to this agent, However, it is
      equally important to mention as to what would be the
      consequence if the noticee does not satisfactorily meet the
                                                                               B
      grounds on which an action is proposed. To put it otherwise,
      we are of the opinion that in order fulfil the requirements of
      principles of natural justice, a show-cause notice should meet
      the following two requirements viz:
      (i) The material/grounds to be stated which according to the
      department necessitates an action;                                       C

      (ii) Particular penalty/action which is proposed to be taken.
      It is this second requirement which the High Court has failed
      to omit.
      We may hasten to add that even if it is not specifically                 D
      mentioned in the show-cause notice but it can clearly and
      safely be discerned from the reading thereof, that would be
      sufficient to meet this requirement.”
       21. Thus, from the above discussion, a clear legal position emerges
that for a show cause notice to constitute the valid basis of a blacklisting   E
order, such 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. Such a clear notice is
essential for ensuring that the person against whom the penalty of
blacklisting is intended to be imposed, has an adequate, informed and
meaningful opportunity to show cause against his possible blacklisting.        F
      22. To test whether the above stipulations as to the contents of
the show cause have been satisfied in the present case, it may be useful
to extract the relevant portion of the said show cause notice dated
10.04.2018 wherein the Corporation specified the actions that it might
adopt against the appellant:                                                   G
      “Whereas, the above cited clauses are only indicative & not
      exhaustive.
      Whereas, it is quite evident from the sequence of events that
      M/s U.MC Technologies Pvt. Ltd, Kolkata has violated the
                                                                               H
1188             SUPREME COURT REPORTS                          [2020] 13 S.C.R.


 A           condition/clauses governing the contract due to its abject
             failure & clear negligence in ensuring smooth conduct of
             examination. As it was the sole responsibility of the agency to
             keep the process of preparation & distribution of question
             paper and conducting of exam in highly confidential manner,
             the apparent leak point towards, acts of omission &
 B
             commission on the part of M/S UMC Technologies Ltd.
             Kolkata.
             Whereas, M/S UMC Technologies Pvt. Ltd. Kolkata is hereby
             provided an opportunity to explain its Position in the matter
             before suitable decision is taken as per T&C of MTF. The
 C           explanation if any should reach this office within a period of
             15 days of receipt of this notice falling which appropriate
             decision shall be taken. ex-parte as per terms and conditions
             mentioned in MTF without prejudice to any other legal rights
             & remedies available with the corporation.”
 D           23. It is also necessary to highlight the order dated 09.01.2019
       passed by the Corporation in pursuant to the aforesaid notice, the operative
       portion of which reads as under:
             “After having examined the entire matter in detail, the
             shortcomings/negligence on the part of M/s UMC
 E           Technologies Pvt. Ltd. stands established beyond any
             reasonable doubt. Now, therefore in accordance with clause
             42.1(II) of the governing MTF, the competent authority hereby
             terminates the contract at the risk and cost of the Agency. As
             per Clause No. 10.1 & 10.2 the said M/s UMC Technologies
 F           Pvt. Ltd. is hereby debarred from participating in any future
             tenders of the corporation for a period of Five years. Further,
             the Security Deposit too stands forfeited as per clause 15.6
             of MTF. This order is issued without prejudice to any other
             legal remedy available with FCI to safeguard its interest.”

 G            24. A plain reading of the 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.
       After listing 12 clauses of the “Instruction to Bidders”, which were part
       of the Corporation’s Bid Document dated 25.11.2016, the notice merely
       contains a vague statement that in light of the alleged leakage of question
 H     papers by the appellant, an appropriate decision will be taken by the
UMC TECHNOLOGIES PRIVATE LIMITED v. FOOD CORPORATION 1189
       OF INDIA AND ANR. [S. ABDUL NAZEER, J.]

Corporation. In fact, Clause 10 of the same Instruction to Bidders section       A
of the Bid Document, which the Corporation has argued to be the source
of its power to blacklist the appellant, is not even mentioned in the show
cause notice. While the notice clarified that the 12 clauses specified in
the notice were only indicative and not exhaustive, there was nothing in
the notice which could have given the appellant the impression that the
                                                                                 B
action of blacklisting was being proposed. This is especially true since
the appellant was under the belief that the Corporation was not even
empowered to take such an action against it and since the only clause
which mentioned blacklisting was not referred to by the Corporation in
its show cause notice. While the following paragraphs deal with whether
or not the appellant’s said belief was well-founded, there can be no             C
question that it was incumbent on the part of the Corporation to clarify in
the show cause notice that it intended to blacklist the appellant, so as to
provide adequate and meaningful opportunity to the appellant to show
cause against the same.
       25. The mere existence of a clause in the Bid Document, which             D
mentions blacklisting as a bar against eligibility, cannot satisfy the
mandatory requirement of a clear mention of the proposed action in the
show cause notice. The Corporation’s notice is completely silent about
blacklisting and as such, it could not have led the appellant to infer that
such an action could be taken by the Corporation in pursuance of this
notice. Had the Corporation expressed its mind in the show cause notice          E
to black list, the appellant could have filed a suitable reply for the same.
Therefore, we are of the opinion that the show cause notice dated
10.04.2018 does not fulfil the requirements of a valid show cause notice
for blacklisting. In our view, the order of blacklisting the appellant clearly
traversed beyond the bounds of the show cause notice which is                    F
impermissible in law. As a result, the consequent blacklisting order dated
09.01.2019 cannot be sustained.
       26. In view of our conclusion that the blacklisting order dated
09.01.2019 passed by the Corporation is contrary to the principles of
natural justice, it is unnecessary for us to consider the other contentions      G
of the learned counsel for the appellant. Having regard to the peculiar
facts and circumstances of the present case, we deem it appropriate not
to remit the matter to the Corporation for fresh consideration.
      27. For the foregoing reasons, the appeal succeeds and it is
accordingly allowed. The order dated 13.02.2019 passed by the High               H
1190                SUPREME COURT REPORTS                     [2020] 13 S.C.R.


 A     Court is set aside. The Corporation’s order dated 09.01.2019 is hereby
       quashed only so far as it blacklists the appellant from participating in
       future tenders. The parties will bear their own costs.
             28. Pending application(s), if any, shall stand disposed of.

 B
       Ankit Gyan                                                  Appeal allowed.




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