UMC TECHNOLOGIES PRIVATE LTD. Vs. FOOD CORPORATION OF INDIA

Shubhi Tiwari

Introduction
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. 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 tend
Facts
The Food Corporation of India had issued a bid to appoint a recruitment agency to conduct
the process of hiring watchmen for the corporation's office.The appellant agency had applied
and was successful. Later, when the appellant agency conducted an exam to recruit watchmen,
police officials arrested certain individuals including a member of the appellant company for
leaking the question paper.
Food Corporation of India had issued an order to blacklist the UMC Technologies Private
Limited from participating in any future tenders of the Corporation for a period of 5 years.
UMC Technologies Private Limited approached the Apex Court against the order of the High
Court which dismissed the challenge against this blacklisting order.
Issue
Whether the FCI’s decision to blacklist the appellant from endeavouring any future FCI project
is ultra vires?
Judgement
If a show-cause notice intends to blacklist the recipient of the notice in case of an unsatisfactory
reply, this stipulation must be clearly mentioned in the notice. This observation was recently
made by the Supreme Court in an appeal by UMC Technologies Pvt. Ltd against the order of
the Madhya Pradesh High Court. The high court had upheld the order of the Food Corporation
of India (FCI) which terminated a contract with the appellant and also blacklisted the company
from participating in any tenders of the corporation for 5 years.
The appellant argued before the bench of Justices S. Abdul Nazeer and B. R. Gavai that the FCI
had no power to blacklist the company. Moreover, in the absence of a valid show-cause notice,
the consequent blacklisting order cannot be sustained.
The bench, while explaining what constitutes a valid show-cause notice, observed: “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 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".
Conclusion
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