Simplified Explanation of the Judgment

The Patna High Court recently ruled in favour of a multi-state agro cooperative society whose membership with the National Cooperative Consumers Federation of India (NCCF) was abruptly terminated and blacklisted without prior notice. The society had been empanelled for procurement of food grains under the Price Stabilization Fund (PSF) Scheme, which is a government initiative to regulate the prices of essential commodities by procuring them from farmers at a minimum support price (MSP).

The cooperative society had been sourcing wheat from farmers and was required to deposit the procured grains with the Food Corporation of India (FCI). The issue arose when the NCCF alleged that some empanelled agencies, possibly including the petitioner, failed to deposit the procured wheat with FCI as per the norms.

According to the petitioner, they were never served with a specific notice or allegation that they had violated the conditions of empanelment. Instead, NCCF had issued general advisories warning all agencies to deposit the wheat with FCI. However, there was no indication that these notices were directly addressed to the petitioner or that they were intended as warnings of impending blacklisting or membership termination.

Despite the absence of a targeted show-cause notice or specific allegations, the petitioner received a letter from the NCCF on 14.08.2024 stating that their membership had been cancelled and they were blacklisted permanently from conducting any future business with NCCF.

The High Court found this approach to be legally flawed on multiple grounds:

1. Violation of Natural Justice: The court emphasised that cancelling the petitioner’s membership and blacklisting them without issuing a proper show-cause notice violated principles of natural justice. No opportunity was given to the petitioner to respond or defend itself.
2. Absence of Specific Allegations: The court noted that the records did not contain any evidence of a direct violation by the petitioner or failure to deposit wheat with FCI. The notices were general advisories lacking specificity.
3. Illegal Indefinite Blacklisting: The court strongly held that blacklisting an agency for an indefinite period is contrary to law and logic. Citing past precedent, it reiterated that such punitive measures must be proportionate and time-bound.

Furthermore, the NCCF, though technically a conglomerate of private cooperative bodies, was considered to be acting as a “State” under Article 12 of the Constitution. Since it was engaged in implementing government schemes and handled public functions involving food grain procurement at MSP, it had a legal duty to act in accordance with constitutional norms, including fairness and transparency.

Recognising the serious impact of blacklisting, the court termed such actions as amounting to a “civil death” for the petitioner. Being blacklisted by NCCF would not only bar the petitioner from government-linked food procurement but also diminish its credibility with other cooperatives and agencies.

Significance or Implication of the Judgment

This judgment has far-reaching implications for cooperative societies and other agencies engaged in government-backed procurement schemes. It establishes that:

• Cooperative federations like NCCF must follow due process before taking punitive actions.
• Indefinite blacklisting is inherently illegal and cannot be imposed without justification and limitation.
• Organisations performing public functions under government schemes are bound by constitutional obligations, even if they are not traditional government bodies.

The decision reinforces procedural safeguards for empanelled agencies and mandates administrative fairness in public-private contractual arrangements.

Legal Issue(s) Decided and the Court’s Decision with reasoning

• Whether NCCF, though a cooperative body, can be considered a “State” under Article 12?
  • Yes. Since NCCF functions closely with the Government under schemes like PSF and discharges public duties, it qualifies as a “State” under Article 12.
• Whether the blacklisting of the petitioner without notice is valid?
  • No. The court held that blacklisting without prior notice and specific allegations violates principles of natural justice.
• Can an entity be blacklisted indefinitely?
  • No. The court reiterated that indefinite blacklisting is impermissible in law and any such action must be reasoned, proportionate, and time-bound.
• Relief Granted:
  • The impugned order dated 14.08.2024 was set aside.
  • The court directed NCCF to issue a specific notice to the petitioner with detailed allegations, provide an opportunity to respond, and pass a fresh, reasoned order within 4 weeks.

Judgments Relied Upon or Cited by Court

• Gorkha Security Services vs. Government (NCT of Delhi) and Others, (2014) 9 SCC 109 — Cited to emphasise that any notice intending blacklisting must clearly mention the proposed punishment and reasons.

Case Title
Sonartari Multi-State Agro Cooperative Society Ltd. vs. Union of India & Ors.

Case Number
Civil Writ Jurisdiction Case No. 14271 of 2024

Citation(s)
To be added manually

Coram and Names of Judges
Hon’ble The Acting Chief Justice
Hon’ble Mr. Justice Partha Sarthy

Names of Advocates and who they appeared for
Mr. Ansul, Sr. Advocate — for the petitioner
Ms. Aastha Ananya, Advocate — for the petitioner
Mr. Amit Narayan, Advocate — for the respondents

Link to Judgment
https://www.patnahighcourt.gov.in/ShowPdf/web/viewer.html?file=../../TEMP/65fcc5be-bd17-4da6-86ce-de8fb86a0065.pdf&search=Blacklisting

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