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K.G. Khosla and Company Vs. the Union of India and ors. - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtDelhi High Court
Decided On
Case NumberCivil Writ Petition No. 1166 of 1969
Judge
Reported in7(1971)DLT429
ActsConstitution of India - Article 14
AppellantK.G. Khosla and Company
RespondentThe Union of India and ors.
Advocates: M.C. Chagla,; B.R. Iyengar,; Bishambar Lal,;
Cases ReferredPunnen Thomas v. State
Excerpt:
.....based on article 21. it can never be said that when a trader is subjected to a decision that the government of india will not trade with him for a particular period and that decision is circulated to the various ministries of the government functioning throughout the territories of india as well as to the union territories administered under article 239, which have no legislatures no stigma is cast upon him and that the freedom of trade of such 'person''is not jeopardised. we are of the view that the impugned order in this case clearly casts a stigma on the petitioners and injures their right to trade. it cannot be said that the petitioners would continue to enjoy that fundamental right of freedom of trade while functioning under the shadow of a decision circulated to all the..........it was pointed oat that the ingredients of the said expression were placed in two articles in the indian constitution namely article 19 and 21. the exact words used in that judgment were reproduced in satwant singh v a. p. 0. new delhi and others' and it was observed that the expression personal liberty as used in article 21 was a compendious term to inclad within itself all varieties of rights which go to mikeupt the ptrson liberties it was also accepted that while article- 19(1) dealt with particular aspects or attributes of freedom, the words personal liberty in article 21 comprised the residue. dr. singhvi, arguing for the respondents, submitted that in the matter of miking contracts for purposes of trade the government was in no different situation than that of an individual and.....
Judgment:

P.S. Safeer, J.

(1) This writ petition is a sequel to Civil writ Petition No. 4470 1968 whereby the order dated the 7th of May 1968 blacklisting the petitioners purporting to have been made under clause 3 (iii) of the Standardised Code against the petitioners, was quashed by the judgment dated the 7th October 1968 of a Division Bench of this Court (S K. Kapur and T.V. R Tatachari, JJ.). Upon a certificate granted by this Court an appeal was taken against the aforementioned decision to the Supreme Court by the respondents. When the appeal came up for hearing on 12-8-1969 the period for which the blacklisting order was operative had expired and the Supreme Court considered it unnecessary to express any opinion on the correctness or otherwise of the at or asaid decision.

(2) Shortly thereafter the impugned order was made on the 9th of October, 1939 and it is in the following terms :-

Ministry Of Foreign Trade And Supply (DEPARTMENTOF SUPPLY) New Delhi, the 9th October, 1969. Office Memorandum The undersigned is directed to say that Government of India have decided to have no further business dealings in the non-statutory sphere with the fromof K.G. Khosla and Company (P) Ltd., Desh Bandhu Gupta Road, New Delhi, for a period of 10 months from the date of the issue of this office Memo. 2. The abovementioned facts shall not be conveyed to the firm concerned or others net concened. sd/-Z S.S. Puri, Director (Viglilance) To -All Ministries Department etc., of the Government of India and certain Union Territories as per Standard List. Copy to Guard File.'

The order shows that it is was directed to be sent to all Ministries Department etc., of the Government of India and certain Union Territories as per Standard List. The impugned order records the decision of the Government of India not to have further business dealings with the petitioners in the non-statutory sphere for a period of ten months from the date of its issue.

(3) The petitioners are a private limited company incorporated under the Indian Companies Act and their registered office is at, Desh Bandhu Gupta Road, New Delhi. The petitioners are engaged in the business of manufacture, production and sale of Air Compressors and their spare parts. It is admitted that the petitioners have been doing business with the Government of India. It is also admitted that the trouble between the parties arose in consequence of a report that the petitioners were charging higher margin of profit than the one disclosed by them. At one stage, the Special Police Establishment made certain investigations and ultimately the Cost Accounts Officer of respondent No. 2 after going through certain records belonging to the petitioners submitted a report to respondent No. 2. Then the order dated 7th of May 1968 blacklisting the petitioners was passed. The petitioners aliege that the basis of the said order was the report submitted by the Cost Accounts Officer and recommendations of the Special Police Establishment.

(4) That blacklisting order was struck down, as already stated, by a Division Bench of this Court on two grounds The first ground was that the right of a Corporation to trade was included in 'personal liberty' guaranteed by Article 21 of the Constitution The other ground was that the blacklisting order was to the prejudice of the petitioners and could not have been passed without giving them any opportunity to explain their stand and the principles of natural justice had been infringed.

(5) The petitioners have stressed the point that the impugned order is based upon the same material on which was based the blacklisting order dated the 7th of May 1968. Article 13 provides that any law which is inconsistent at any time with the provisions of Part Iii of the Constitution shall be void to the extent of such inconsistency It insists on the maintenance of only such laws which are in strict conformity with the funda mental rinbts contained in Part III. Article 14 of the Constitution is in the following terms : -

l4 The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India,' It contains a Constitutional guarantee of equality before the 'law' and the prevalence of the rule of law in all situations. It prohibits the State from discriminating through legislative, administrative executive action. Article 14 to my mind, runs in two parts. The first is where it says that the State shall not deny to any person equality before the law. I hat part leads to a limitation on the State not to discriminate either through legislation or any kind of administrative executive action. The administrative and executive orders which the State may pass have also their source in the Constitution itself and such orders cannot exceed the legislative field The executive, the legislatures and the judiciary, owe their existence to the Constitution and function in their own spheres as provided by the Constitution. The Parliament and the State legislatures may make various laws, but their validity is to be tested in accordance with their Constitutional competence to legislate. The law

(6) The present order, which the petitioners seek to impugn, was passed just after the disposal of the appeal by the Supreme Court on 9-10-1969 and again without affording them any opportunity of being heard. It cannot be controverter that it interferes with their business and affects their reputation.

(7) Mr Chagla, learned counsel for the petitioners, first submitted that by recording the impugned order under the heading 'Memorandum' the respondents had sought merely to change the name but in substance its affect remained the same as of the earlier one. His argument was that the blacklisting order caused certain results and the impugned order did not cause any dissimilar results. He went to the extent of stressing that the respondents had shown disregard to the judgment of another Division Bench of this Court dated 7th of October, 1968, by resorting to a device by which they had this time not expressly pasted any order under clause 3 (iii) of the Standardised Cods bat had in substance repeated the same order in the garb of the phraseology which they have net employed to achieve the same purpose. He placed reliance upon the former judgment of the Court and said that the words 'personal liberty used in Article 21 of the Constitution have been correctly construed so as to include liberty to trade freely and that the impugned order directly interfered with the petitioners freedom of trade. One of the arguments is that it is the petitioners' fundamental right under Article 21 which is infringed, The other stand taken on behalf of the petitioners is independent of Article 21. It is said that Article 14 by itself confers a fundamental right and the petitioners can invoke the same in this case in order to ask the Court to accord to them equal protection of the laws within the territory of India. Mr.Chagla in the first instance referred to Article 298 of the Constitution and said that the Government was doing business as authorised by that provision. He placed reliance on the case reported as Krishan Chander Nayar v. The Chairman, Central Tractor Organisation and others', to urge that there was a binding similarly between the provisions of Article 16(1) and Article 21 of the Constitution of India. The rule laid down in this case was that an arbitrary imposition of a ban against a person's entry into Government service amounted to an infringement of his right to equality of opportunity in the matters of employment guaranteed by Article 16(1) of the Constitution. It was submitted that equality of opportuity in matters relating to employment deserved to be equated with the equal personal liberty which every citizen should have in the matter of trade. A combined reading of Article 14 and 21 leads to the conclusion that no person can be deprived of his personal liberties except according to procedure established by law which must necessarily be e-iually available to all persons within the territory of India. That would be a fundamental incidence of the rule of law. Mr. Chagla placed reliance on the obsevations contained in Satwant Singh Sawhney v.D Ramarathnam, A.P. New D&lhi; and others'. In paragraph 28 of that judgment the observations formerly made in Kharak Singh v. State of U. P, were considered and reaffirmed. The Supreme Court was concerned with the interpretation of Article 21 of the Constitution Another case was also cited by Mr B. R. L. Iyengar on behalf of the petitioners and we allowed the citation in the course of his reply to the arguments addressed on behalf of the respondents because in the case cited by him the Supreme Court had been concerned with the interpretation of Articles 19 and 21 and the argument which he was making was no different than the one on which Mr. Chagla had taken his stand during the opening address. The case brought to our notice by Mr. Iyengar is the well known case of A. K. Gopalan v The State of Madras and the observations to which our attention was drawn were made inparagraphs Ii and 12 of that judgment. Although it was suggested that the horizons of judicial interpretation have widened since that judgment and interpretation made in : [1967]3SCR525 is wider than that recorded in the 1950 case, we find that the observations made by Kania, C. J. were in the same direction. The words 'personal liberty were held to be containing in themselves several rights and those rights were such rights which had not been enumerated in Article 19. To quote from the said judgment it was observed asunder:- Deprivation (tot?l loss) of personal liberty, which inter alias includes the right to eat or sleep when one likes or to work or not to work as and when one pleases and several such rights sought to be prelected by the expression 'personal liberty' in Article 21, is quite different from restriction (which is only a partial control) of the right to move freely (which is relatively a minor right of a citizen) as safeguarded by Article 19(1)(d) It appears to us that the learned Chief Justice was of the view that the words 'personal liberty' as used in Article 21 did confer upon a person' several unenumerated rights which may be available to him. In that judgment also the 5th and 14th amendments to the Constitution of the United States of America were noticed In our view, the words 'personal liberty' in Article 21 have a wide scope. While dealing with the same expression in Kharak Singh v. State of U. P the Supreme Court accepted the meaning put upon the expression liberty' to by Field, J, in Munn v. Illinois' but it was pointed oat that the ingredients of the said expression were placed in two Articles in the Indian Constitution namely Article 19 and 21. The exact words used in that judgment were reproduced in Satwant Singh v A. P. 0. New Delhi and others' and it was observed that the expression personal liberty as used in Article 21 was a compendious term to inclad within itself all varieties of rights which go to mikeupt the ptrson liberties It was also accepted that while Article- 19(1) dealt with particular aspects or attributes of freedom, the words personal liberty in Article 21 comprised the residue. Dr. Singhvi, arguing for the respondents, submitted that in the matter of miking contracts for purposes of trade the Government was in no different situation than that of an individual and could go by its likes and dislikes. He cited C. K Achutan v. Stata of Kerala and relied upon the observation that a contract entered into by the Government stood on no different looting from a contract held from a private party. In that particular case the Supreme Court dealing with the breach of a contract observed as under:- The gist of the present matter is the breach, if any, of the contract said to have been given to the petitioner which has been car-celled either for good or for had reasons. There is no discrimination, because it is perfectly open to the Governmeat, even as it is to a private party, to choose a person to their liking, to fulfill contracts which they wish to be performed. When one person is chosen rather than another, the aggneved party cannot claim the protection of Article 14 because the choice of the person to fufil a particular contract must be left to the Government Similariy, a contract which is held from Government stands on no different footing from a contract held from a private party The breach of contract, if any may entitle the person aggrieved to sue for damages or in appropriate cases even specific perforroance. but he cannot complain that there has been a deprivation of the right to practice any profession or to carry on any occupation, trade or business, such as is contemplated by Article 19(l)(g) Nor has it been shown how Article 1I of the Constitution may be invoked to prevent cancelltion of a contract in exercise of powers conferred by one of the terms of the contract itself. In that case the Government was invoking the powers which it had in terms of the particular contract itself to cancel the same. Contractual liabilities between the parties arise out of obligations bilaterall incurred by them. The Constitution is not attracted in such a situation. The Government is one of the contracting parties and has the right like any other private party to accept the contract or cancel it and to incur all or any of the consequences which may necessarily arise out of such cancellation.

(8) The learned counsel for the respondents then invited our attention to the observations contained in Vedachala Mudaliar v. Divisional Engineer, High-Ways,' There also it was the right of the Government to enter or not to enter into a contract with a particular person which was the subject of comment. No similar situation is involved in the present case. A reference was then made on behalf of the respondents to K. Bhaskaran v. State of Kerala our attention was drawn to paragraph 5 and we were asked to consider the observations noticed therein and which had been taken out of the judgment of the Supreme Court of the United States in Perkins v. Lukens Stael Co. The observations are quite important and are to the following effect :-

'LIKEprivate individuals and businesses the Government enjoys the unrestricted power to produce its own supplies to determine those with whom it will deal, and to fix the terms and conditions upon which it will make needed purchases;'

'THATjudicial restraint of those who administer the Government's purchasing would constitute a break with settled judicial practice and a departure into fields hitherto wisely and happily apportioned by the genius of our polity to the administration of another branch of Government.'

The learned counsel for the respondents urged that in order to seek the protection of Article 14 the impugned action should be such as may be vocative of a right conferred by law as defined in Article 13. I am of the view that the maintenance and upholding of the rule of law within the territory of India is the prime concern of Article 14 and the phrase 'equal protection of laws' is not restricted to legislated law. The foregoing phrase imbibes within itself the protection which is available to a person because of certain principles of natural justice which are necessarily to be complied with before the rights of any person are sought to be adversely affected. The principles of natural justice require that no person should be condemned unheard and no order should b- passed arbitraily and those principles become available 'as the laws prevaling within the territory of India'.

(9) The learned courser for the respondents, with reference to Article 14 placed reliance upon the observations contained in M/s. Pannalal Biniraj v. Union of India. The observa tions relied upon are to the following effect :-

'INother words, the discetion vested has to be looked at from two points of view, viz., (1) does it admit of the possibility of any real and substantial discrimination, and (2) dees it impinge on a fundamental right guaranteed by the Consitution Article 14 can be invoked ony when both these conditions are Satisfied.'

These observations were made while dealing with ptitiones preferred under Article 32 of the Constitution. The High Courts jurisdiction under Article 226 has, apparently a wider scope. Writs and direction? under Article 226 may be issued even where no fundamental rights contained in Part Iii of the Constitution may have been infringed. But in the present case, as will be seen after dealing with the various citations, Article 14 by itselt is available to the petitioners, It cannot be said that the said Article by itself cannot be invoked. It is also apparent the the petitioners' right guaranteed by Article 21 has also been infirnged. We may record here that Article 21 was not under consideration in the case reported in : [1957]1SCR233 .

(10) Reliance was placed on behalf of the respondents on the majorit view recorded in Punnen Thomas v. State (FB), and it was submitted that Article 14 could not be attracted to a refusal by the Government to do business with a particular party and that even if it be assumed that a stigma is caused on the petitioners, that would not attract the principles of natural justice. In our view the majority view never was that the rule of law contemplated by Article 14 does not imbibe in itself the protection which the rules of natural justice furnish as effectively as any legislated law would.

(11) The minorily judgment was recorded by Mathew, J. The leaned counsel for the petitioners has taken us through that judgment. We are in complete agreement with the minority judgment even though it is not based on Article 21. It can never be said that when a trader is subjected to a decision that the Government of India will not trade with him for a particular period and that decision is circulated to the various Ministries of the government functioning throughout the territories of India as well as to the Union Territories administered under Article 239, which have no legislatures no stigma is cast upon him and that the freedom of trade of such 'person'' is not jeopardised. Our view is that material damage would be involved in the loss of the prospects of entering into advantageous trading with the Government. Coming as it does from the Government such deprivation has also its civil consequences as it would at once touch the reputation of a particular person and would seriously damage his standing in the business world. We are of the view that the impugned order in this case clearly casts a stigma on the petitioners and injures their right to trade. Other business concerns would naturally not be attracted to do business with the petitioners having the impression that the Government had made the decision to outcaste the petitioners because of something which may be inherently wrong about them. As we read Article 21 of the Constitution, the words 'personal liberty' do include the liberty to trade freely within the territories of India. It cannot be said that the petitioners would continue to enjoy that fundamental right of freedom of trade while functioning under the shadow of a decision circulated to all the Ministries of the Government of India and the Union Territories having no legislatures that the Government will not have any business dealings with the petitioners. Such a decision implies that the petitioners are persons with whom it is not desirable for the Government to have any business relations. This type of stigma even when confined to the period of ten months contains in itself a visible black mark for the future. We are not at all impressed by the argument that the impugned order is not one black listing the petitioners under clause 3 (iii) of the Standardised Code. According to us no smokescreen hangs on the face of the impugned order and for all purposes it remains in the same category as the black listing order dated the 7th of May 1968.

(12) The contention raised on behalf of the respondents that the impugned order is purely executive or administrative does not in any way take it outside the constitutional protection. Even if that order.


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