A show cause notice must precede blacklisting, stipulating grounds of proposed action and resultant penalty
What should be the form and content of show cause notice to be served, before deciding as to whether the noticee is to be blacklisted or not?
In other words the question before Court was to determine as to whether it is a mandatory requirement that there has to be a stipulation contained in the show cause notice that action of blacklisting is proposed and if yes, is it permissible to distinguish it from the reading of impugned show cause notice, even when not specifically mentioned that it was about the proposed action of blacklisting that could be taken against the noticee?
The present matter related to dispute where a security contract was awarded to an agency by the hospital. The said agency continued even after the expiry of contractual term for which no payment was made. The hospital had asked the agency for certain clarifications and documents which it failed to provide during the period relevant.
The Court observed that the fundamental purpose behind the serving of Show Cause Notice is to make the noticee understand the precise case set up against him which he has to meet. This would require the statement of allegations detailing out the alleged breaches and defaults noticee has committed, so that he gets an opportunity to rebut the same.
Another requirement is the nature of action which is proposed to be taken for such a breach. It needs to 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 black listing, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action. The purpose of show cause notice is primarily to enable the noticee to meet the grounds on which the action is proposed against him.
It was the common case of the parties in the instant matter that the blacklisting has to be preceded by a show cause notice. With blacklisting many civil and/ or evil consequences follow. It is described as “civil death” of a person who is imposed 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. Once the show cause notice is given and an opportunity to reply to the show cause notice is afforded, it is not even necessary to give an oral hearing.
Thus, in order to fulfil the requirements of principles of natural justice, a show cause notice should state grounds on which action is proposed to be taken along with particular penalty or action. However even if it is not specifically mentioned in the show cause notice but it can be clearly and safely distinguished from its reading, it would be deemed as sufficient to meet the above requirement.
[Gorkha Security Services vs. Govt. of NCT of Delhi & Ors.]