Citation Codes

Equivalent Citations

citation codes

Case Number

W.P(C) 5547/2007 & CM APPL 10273/2007

Attorney(S)

Mr. H.L Tiku, Senior Advocate with Mr. Ravi Kumar Aggarwal and Ms. Bindu Monga, Advocates.
Mr. Jatan Singh, Advocate for UOI.

Judges

S. Muralidhar, J.

Acts

Section 420 read with Section 511 IPC and Section 469 and 471 IPC

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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

In May 2005 the Central Bureau of Investigation (CBI) informed the Ministry that Mr. Harish Gupta, Director (R&D) of M/s Shogi Communications Ltd. (SCL), had been chargesheeted in 1996 (CBI case No. RC 9(S)/96-DLI) for offences under Section 420 read with Section 511 IPC and Sections 469 and 471 IPC. The allegation was that Mr. Harish Gupta forged/used an End User Certificate, purportedly issued by the Communication Directorate of NSG, in connection with the import of certain systems in 1995–96.

Following the CBI communication, an order dated 4 July 2005 from the office of the IFA (Army/M) asked the DGMI to delete SCL and two sister companies (Secure Telecom Pvt. Ltd. (STPL) and Sidhi Tech Services Ltd. (STSL)) from the vendor list and to stop transactions with them. The DGMI issued an order dated 9 July 2005, and the Ministry of Defence (MOD) on 19 September 2005 issued a consequential advisory stating it would be desirable to avoid contact with SCL and Mr. Harish Gupta.

SCL filed Writ Petition (Civil) No. 1815 of 2007 challenging the CBI communication and the various orders on grounds that (i) no notice had been given in violation of natural justice and (ii) the blacklisting was for an indefinite period. A Single Judge disposed of that writ on 9 March 2007 directing SCL to make a representation and to be given a personal hearing; an appropriate order was to be passed after hearing.

Pursuant to that direction, SCL made a detailed representation and was given a hearing on 4 April 2007. Thereafter the Special Secretary in the MOD passed a detailed order on 19 April 2007 affirming the blacklisting. SCL challenged the 19 April 2007 order in the present proceedings. The petition was ultimately dismissed by the Court.

Additional factual points recorded in the opinion: SCL was incorporated in November 1998 (after the 1996 chargesheet); the chargesheet pertained to Mr. Harish Gupta personally; SCL and the two sister companies were described in the impugned order as closely held and promoted by Mr. Harish Gupta and family members; SCL had been engaged in providing solutions to intelligence and other security agencies.

Legal Issues Presented

Whether the impugned communications/orders amounted to virtual blacklisting done without notice and thus violated principles of natural justice.
Whether the blacklisting was for an indefinite period and therefore arbitrary.
Whether the impugned order contained cogent reasons justifying blacklisting, particularly in the context of national security and the allegation of forgery of an End User Certificate.
Whether pendency of a criminal case (the chargesheet against Mr. Harish Gupta) could justify continuing the blacklisting or whether pendency alone was an insufficient ground for indefinite blacklisting.

Arguments of the Parties

Petitioner's Arguments (SCL)

SCL emphasized that it was incorporated only in November 1998 while the criminal charges against Mr. Harish Gupta were filed in 1996, and therefore SCL was not involved in the alleged criminality.
The Petitioner argued that the blacklisting imposed from 2005 onwards was indefinite and arbitrary, relying on decisions of this Court and other High Courts concerning requirements for specified periods of blacklisting and reasoned orders.
It was contended that the impugned order lacked cogent reasons, and mere pendency of a criminal case could not justify indefinite blacklisting.
Reference was made to Clause 3.5 of Chapter III of the Defence Procurement Manual-2006 to submit that blacklisting should be for a specified period and decided after due consideration of all facts and circumstances.
The Petitioner also submitted that communications dated 19 September 2005 incorrectly stated that SCL itself was under trial for forgery/use of an end user certificate when the accused was Mr. Harish Gupta personally.

Respondents' Arguments (Ministry of Defence and others)

The Respondents submitted that before receiving the CBI communication they were not aware Mr. Harish Gupta faced criminal charges; upon receiving the information, and given the sensitive nature of defence projects, they took steps to avoid dealings with the concerned firms in the interest of national security.
They pointed out that a full hearing was afforded to SCL in compliance with the 9 March 2007 order of the Court, so any natural justice complaint was no longer available.
The Respondents emphasized that SCL, STPL and STSL were closely held and promoted by Mr. Harish Gupta and his family, and that SCL had provided services to agencies such as IB, RAW, Air Force and Signal Intelligence—matters relevant to national security.
The Respondents stated that the decision to review the blacklisting could be taken only after conclusion of the criminal case against Mr. Harish Gupta; the counter-affidavit expressly recorded that review of further dealings would await disposal of the pending court case.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Kavery Infrastructure Pvt. Ltd. v. Delhi Jal Board (decision dated 14 September 2007 in W.P. (C) No. 5398 of 2007)	Relied upon by the Petitioner in support of the contention against indefinite blacklisting.	The Court noted the Petitioner's reliance but concluded that, on the facts of the present case, the blacklisting was not indefinite and therefore the decision did not assist the Petitioner.
Saraswati Dynamics (P.) Ltd. v. Union of India, 2003 IV AD (Delhi) 225	Relied upon by the Petitioner regarding limits on blacklisting and need for reasoned decision.	The Court treated this as part of the Petitioner's reliance but found the impugned order contained reasons and was not for an indefinite period, distinguishing this precedent on facts.
A. Rajendran v. The General Manager, Thermal Power Station I, Nayveli Lignite Corporation Ltd. (Madras High Court, decision dated 16 October 2003 in W.P. (C) No. 17517 of 2002)	Relied upon by the Petitioner in support of the position against indefinite blacklisting or arbitrary action.	The Court noted the reliance but held that the circumstances and reasoning in the impugned order made that precedent inapplicable to the present facts.
Indian Oil Corporation Ltd. v. Sps Engineering Ltd. 128 (2006) DLT 417 (DB)	Relied upon by the Petitioner to argue that cogent reasons must be given for blacklisting.	The Court found that, unlike in Indian Oil, the impugned order here was detailed and contained reasons; consequently the precedent was distinguished.
Mekaster Trading Corporation v. Union of India 103 (2003) DLT 573	Relied upon by the Petitioner to challenge the sufficiency of reasons for blacklisting.	The Court held that, unlike in Mekaster, the impugned order set out reasons related to national security and the seriousness of the charges, and therefore Mekaster did not apply.
R.K. Machine Tools Ltd. v. Union of India, 2010 III AD (Del) 191	Relied upon by the Petitioner for the proposition that mere pendency of a criminal case cannot justify indefinite blacklisting.	The Court observed that unlike in R.K. Machine Tools, in the present case the FIR has progressed to a criminal trial (at the stage of prosecution evidence) and the MOD has tied review of dealings to disposal of that criminal case; therefore R.K. Machine Tools was of no assistance to the Petitioner.
TSL Defence Technology P. Ltd. v. Union of India (decision dated 26 May 2010 in W.P. (C) No. 1346 of 2010)	Relied upon by the Petitioner to contend that pendency of criminal proceedings alone does not warrant indefinite blacklisting.	The Court held that TSL Defence Technology did not assist the Petitioner because, in the present matter, the criminal trial had advanced and the MOD had indicated review would follow disposal of the criminal case.

Court's Reasoning and Analysis

The Court's analysis proceeded by addressing each principal contention advanced by the Petitioner and by comparing the facts of the present case with the precedents relied upon.

First, the Court considered the natural justice complaint. It recorded that following the Single Judge's directions of 9 March 2007, SCL made a detailed representation and was given a full hearing on 4 April 2007. The impugned order dated 19 April 2007 was passed after that hearing. Consequently, the Court held that the Petitioner could no longer contend that principles of natural justice had been violated.

Second, the Court examined whether the impugned order contained reasons. The Court described the impugned order as "very detailed" and specifically quoted its paras 14 and 15 which refer to (a) the serious nature of the charges against Mr. Harish Gupta concerning forgery of an End User Certificate purportedly issued by NSG, (b) the sensitive character of defence projects and procurements where national security is paramount, (c) the close familial control of SCL, STPL and STSL by Mr. Harish Gupta and family, and (d) the overall national security interest as justifying the Government advisory to cease dealings. On that basis the Court found that cogent reasons had in fact been provided.

Third, the Court dealt with the contention that the blacklisting was indefinite. The impugned order and the respondents' counter-affidavit expressly linked review of further dealings to disposal of the pending criminal case against Mr. Harish Gupta (para 3(d) of the counter-affidavit). The Court interpreted this as indicating that the blacklisting was not meant to be indefinite but would be reviewed after final disposal of the criminal proceedings.

Fourth, the Court compared the facts of the case with the precedents relied upon by the parties. It distinguished Mekaster and Indian Oil on the ground that, unlike those cases, the impugned order did contain reasons. It also distinguished R.K. Machine Tools and TSL Defence Technology by noting that here the FIR had led to a criminal trial which had proceeded to the stage of prosecution evidence; for that reason those authorities were considered inapplicable to the present facts.

Having found that the procedural direction of 9 March 2007 was complied with (hearing afforded), that the impugned order did give reasons related to national security and the seriousness of the allegations, and that the blacklisting was to be reviewed after disposal of the criminal case, the Court concluded there was no ground for interference.

Holding and Implications

Holding: The writ petition was dismissed and the pending application was also dismissed. (The Court upheld the impugned order of 19 April 2007 affirming the blacklisting.)

Implications:

The Court held that the requirement of natural justice had been satisfied because SCL was afforded the representation and hearing ordered on 9 March 2007 before the impugned decision was made.
The Court found that the impugned order contained adequate reasons — specifically reasons grounded in the seriousness of the alleged forgery, the sensitive nature of defence projects, and national security concerns — and therefore the order was not arbitrary for lack of reasons.
The Court concluded that the blacklisting was not indefinite: the respondents indicated that review of whether to resume dealings would be undertaken only after disposal of the criminal case against Mr. Harish Gupta, and the Court accepted this position.
No interference with the MOD's decision was warranted on the facts; the decision to blacklist SCL, STPL and STSL was upheld subject to review after conclusion of the criminal proceedings.
The opinion does not purport to lay down a new legal principle; it applies existing principles to the facts and distinguishes prior authorities relied upon by the parties.

End of summary. This document is strictly based on the content of the provided opinion and does not add or infer facts beyond that text.

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Shoghi Communications Ltd Petitioner v. Union Of India & Anr S

1. This is the second round of litigation concerning the blacklisting of the Petitioner by an order dated 9th July 2005 issued by the Directorate General of Military Intelligence (‘DGMI’) and the consequential order dated 19 September 2005 issued by the Ministry of Defence (‘MOD’) stating that on advice from the National Security Council Secretariat “it would be desirable to avoid any contact with M/s Shogi Communications Ltd (‘SCL’)” and Mr. Harish Gupta.

2. Information was received from the Central Bureau of Investigation (‘CBI’) on 11 May 2005 about Mr. Harish Gupta, Director (R&D) of the Petitioner SCL having been chargesheeted in CBI case No. RC 9(S)/96-DLI for offences under Section 420 read with Section 511 IPC and Section 469 and 471 IPC in 1996. The said communication pointed out that the allegation against Mr. Harish Gupta was that “he forged/used an End User Certificate purported to have been issued by Communication Directorate of NSG for importing two systems T-1285 Customs Act including Key Generation Programme OPG-2002 and crypts fill Device CFD-2001 during the year 1995-96. The offence came to light when the said End User Certificate was referred back by authorities to NSG for some changes.” This led to an order dated 4 July 2005 being issued by the office of the IFA (Army/M) addressed to the DGMI that SCL and its two sister companies, Secure Telecom Pvt. Ltd. (STPL) and Sidhi Tech Services Ltd. (STSL) should be deleted from the vendor list and all transactions with the three companies should be stopped forthwith.

3. The Petitioner challenged the validity of the CBI's communication dated 11 May 2005, the order dated 4 July 2005 of the IFA, the order dated 9 July 2005 of the DGMI and the consequential order dated 19 September 2005 of the MOD blacklisting the Petitioner, by filing Writ Petition (Civil) No. 1815 of 2007 in this Court. In that writ petition the principal grounds of challenge were that the orders were passed without issuing any notice to the Petitioner and, therefore, were violative of principles of natural justice and that the blacklisting was for an indefinite period.

4. The aforementioned Writ Petition (C) No. 1815 of 2007 was disposed of by an order dated 9 March 2007 passed by the learned Single Judge of this Court. The operative portion of the said order reads as under:

“The petitioner is aggrieved by these orders/communications on the ground that these orders amount to virtual blacklisting without any fixed duration. Secondly, the blacklisting has been done without following the principles of natural justice i.e, without issuing any notice to the petitioner.

The learned counsel appearing on behalf of the respondents submitted that he is not admitting the fact that no notice was issued to the petitioner. However, the respondents would be willing to give a hearing to the petitioner so that all the aspects which the petitioner seeks to agitate before this court with regard to its blacklisting can be raised before the appropriate authority.

This writ petition is disposed of with the direction that the petitioner shall make a representation within a week to the Ministry of Defence through respondent No. 2 and, thereafter, the respondents shall nominate the appropriate authority before whom the petitioner may appear for a personal hearing. This would be done within 2 weeks thereafter. An appropriate order would be passed within 14 days after the date of hearing. It is made clear that this court has not expressed any opinion on the merits of the case. The order shall clearly indicate as to whether it concurs with the impugned orders/communications or not.”

5. Consequent upon the above orders, SCL made a detailed representation and was also given a hearing on 4 April 2007. Thereafter, by the impugned order dated 19 April 2007 the Special Secretary in the MOD passed a detailed order affirming the blacklisting of the Petitioner.

6. Mr. H.L Tiku, learned Senior counsel for the Petitioner first submitted that SCL was incorporated only in November 1998 whereas the criminal case against Mr. Harish Gupta was filed much earlier. The chargesheet was filed in 1996 itself. SCL was therefore nowhere involved in the said criminal case. Secondly, it is submitted that there could be no indefinite blacklisting of the Petitioner from 2005 onwards and this rendered the impugned order wholly arbitrary. Reliance is placed on the decisions of this Court in Kavery Infrastructure Pvt. Ltd. v. Delhi Jal Board (decision dated 14 September 2007 in W.P (C) No. 5398 of 2007), Saraswati Dynamics (P.) Ltd. v. Union of India, 2003 IV AD (Delhi) 225, and the decision of the Madras High Court in A. Rajendran v. The General Manager, Thermal Power Station I, Nayveli Lignite Corporation Ltd. (decision dated 16 October 2003 in W.P (C) No. 17517 of 2002). Thirdly, it is submitted that no cogent reasons have been given in the impugned order. Reliance is placed on the decisions of this Court in Indian Oil Corporation Ltd… v. Sps Engineering Ltd…. 128 (2006) DLT 417 (DB) and Mekaster Trading Corporation v. Union of India 103 (2003) DLT 573. It is submitted that mere pendency of a criminal case cannot be a justification for indefinite blacklisting of the Petitioner. Reliance is placed on the decision in R.K Machine Tools Ltd. v. Union of India, 2010 III AD (Del) 191 and the decision dated 26 May 2010 in W.P (C) No. 1346 of 2010 (TSL Defence Technology P. Ltd. v. Union of India). Referring to Clause 3.5 of Chapter III of the Defence Procurement Manual-2006 issued by the MOD, Government of India, Mr. Tiku submits that the blacklisting had to be for a specified period of time and further that the decision has to be taken by the appropriate authority “after due consideration of all the facts and circumstances of the case.” It is submitted that no action was taken for about nine years after filing of the chargsheet and the CBI suddenly issued a directive in 2005 which led to the impugned order of blacklisting. It is submitted that the circumstances under which the blacklisting order was passed rendered it arbitrary and unreasonable. It is submitted that the communication dated 19 September 2005 wrongly stated that SCL and another sister company are under trial for forgery/use of end user certificate. In fact the accused was Mr. Harish Gupta and not SCL. Moreover, SCL was incorporated only in 1998, two years after the chargesheet was filed against Mr. Harish Gupta.

7. Mr. Jatan Singh, learned counsel appearing for the Respondents points out that earlier to the communication from the CBI the MOD was not aware of the fact that Mr. Harish Gupta was facing criminal charges. The trial in the said criminal case is in progress. It is at the stage of prosecution evidence. It is submitted that at the time the said criminal case was registered Mr. Harish Gupta was carrying on business in a different name. He submits that as far as the requirement of compliance of rules of natural justice is concerned, a full fledged hearing was given to the Petitioner in terms of the order dated 9 March 2007 passed by this Court in W. P. (C) No. 1815 of 2007, and, therefore, this ground is no longer available to the Petitioner. He further submits that the three companies, i.e, SCL, STPL and STSL were closely held companies and were promoted by Mr. Harish Gupta and his wife, son and daughter-in-law. He submitted that in matter of defence projects national security was of paramount importance. In view of the doubtful credentials of the owners of SCL and the overall situation of national security it was decided not to have any business dealing with SCL, STPL or STSL. He submits that a decision to review the blacklisting order can be taken only after the criminal case against Mr. Harish Gupta is concluded.

8. The above submissions have been considered. After the order dated 9 March 2007 was passed by this Court in earlier W.P (C) No. 1815 of 2007 filed by SCL, it has been given a full-fledged hearing. The impugned order dated 19 April 2007 has been passed thereafter. The Petitioner can therefore no longer contend that the principles of natural justice have been violated.

9. The impugned order dated 19 April 2007 is a very detailed one. This Court is unable to accept the contention of learned counsel for the Petitioner that it does not contain reasons. The impugned order notes the fact that the three companies i.e SCL, STPL and STCL are closely held companies. Although SCL was incorporated in 1998, Mr. Harish Gupta was its Director (R&D), his wife looked after the finance division and his son and daughter-in-law were the Directors. SCL was working with IB, RAW, Air Force and Signal Intelligence providing them with solutions for monitoring communication equipment. In paras 14 and 15 of the impugned order, the following reasons have been stated:

“14. As the charges against Mr. Harish Gupta, Director and owner of the above firms were forgery of End User Certificate, purportedly to have been issued by NSG, are extremely serious in nature, the facts could not have been overlooked in the interest of national security. In matters of defence projects and procurements, national security is of paramount importance. Therefore, the Government advised to cease all dealing because of doubtful credentials of the owner/companies.

15. Keeping in view the facts brought before the Government and the doubtful credential of the owner and firms, and in the overall national security interest as well as the project being of a highly sensitive nature, the Government advisory appears to be in order.”

10. Unlike the facts in Mekaster Trading Corporation v. Union of India and Indian Oil Corporation Ltd… v. Sps Engineering Ltd…., it cannot be said that no reasons have been given in the instant case for blacklisting the Petitioner. The charge that forgery was committed of the End User Certificate, purportedly issued by the NSG, is a serious matter and could not have been overlooked in the interests of national security. Also, unlike the facts in R.K Machine Tools and TSL Defence Technology, the FIR registered in the instant case has progressed to a criminal trial which is at the stage of prosecution evidence. Consequently, the reason cited for the MOD for deciding to stop dealing with SCL cannot be said to be unjustified or arbitrary in the facts and circumstances of the case.

11. This Court is unable to accept the submission made by Mr. Tiku that the order dated 9 March 2007 passed by this Court in W. P. (C) No. 1815 of 2007 was not complied with since the Special Secretary failed to clearly indicate whether she was concurring with the decision to blacklist the Petitioner. The last sentence of the impugned order clearly states that “the Government advisory appears to be in order”.

12. There also appears to be no substance in the submission that the blacklisting order is for an indefinite period. The impugned order and the blacklisting order refer to the fact of the pendency of the criminal case against Mr. Harish Gupta. In the counter affidavit filed by the Respondents it is stated in para 3(d) that “the review of whether to have further dealings with the firms or not can only be taken up after disposal of pending court case against Shri Harish Gupta.” Clearly, therefore, the blacklisting is not meant to be indefinite. The position is to be reviewed after the disposal of the pending criminal case against Mr. Harish Gupta. Consequently, the decisions of this Court in R.K Machine Tools Ltd. and TSL Defence Technology P. Ltd. are of no assistance to the Petitioner.

13. No ground is made out for interference. The writ petition is dismissed. The pending application is also dismissed.

Shoghi Communications Ltd Petitioner v. Union Of India & Anr S

Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioner's Arguments (SCL)

Respondents' Arguments (Ministry of Defence and others)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Shoghi Communications Ltd Petitioner v. Union Of India & Anr S

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