* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ Date of Decision: 11.11.2011
% W.P.(C.) No. 7951/2011
M/S EMPIRE FANTRONICS (I) PVT LTD AND ORS ..... Petitioner
Through: Mr. N.K. Kaul, Sr. Adv. with Mr
Gautam Narayan and Mr. Amit
Gupta, Advocates
versus
UOI AND ORS ..... Respondent
Through: Mr Rajinder Nischal and Mr. M.P.
Singh, Advocates
CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI
1. Whether the Reporters of local papers may
be allowed to see the judgment? : No
2. To be referred to the Reporters or not? : No
3. Whether the judgment should be reported
in the Digest? : No
VIPIN SANGHI, J. (ORAL)
1. By this petition preferred under Article 226 of the Constitution of India, the petitioner assails the order dated 02.11.2011 passed by the Deputy Directorate (QA) for DDG (QA) Director General of Supplies and Disposal (DGS&D), whereby the petitioner has been found guilty of the charges leveled against it and the petitioner company has been de- registered, and its name has been removed from the list of registered suppliers with effect from 14.11.2011.
W.P.(C.) No. 7951/2011 Page 1 of 15
2. The case of the petitioner is that the petitioner is a manufacturer and supplier of ceiling fans, exhaust fans and other electrical products. The petitioner was a registered supplier/vendor of the DGS&D, which is a Central Purchase and Quality Assurance Organisation of Govt. of India, since the year 2006. DGS&D is the nodal agency of the Govt. of India for purchase policy and procedure. The Government Departments/Organisations, who do not have their own infrastructure for purchase of equipment can raise their demands on DGS&D for adhoc procurement. It is stated that the DGS&D has a full fledge quality assurance wing which renders, inter alia, the service of evaluation and inspection for assuring quality of goods supplied by vendors such as the petitioner.
3. The petitioner claims that during the period November- December 2010, it supplied to the administration of Dadra & Nagar Haveli goods of the value of Rs.1,52,67,902/- on the basis of orders placed on its by the Executive Engineer, Electricity Department, Dadra & Nagar Haveli. It is the petitioner's case that these goods were duly inspected by the quality assurance wing of the respondent and inspection notes were issued to the petitioner.
4. The respondent issued a show cause notice dated 27.06.2011 to the petitioner alleging that communication had been received from the concerned administration of Dadra & Nagar Haaveli by the CCA, Vigilance Directorate of the office of DGS&D, wherein it had been reported that the petitioner was involved in financial embezzlement. The petitioner was alleged to be involved in a fraud of raising bills and W.P.(C.) No. 7951/2011 Page 2 of 15 claiming payment from CCA fraudulently. By placing reliance on Clause 5.17.2 of the DGS&D Manual, on account of the alleged involvement in financial embezzlement and fraud, and for raising fraudulent bills to the CCA, the petitioner was required to show cause as to why the petitioner's registration with the DGS&D should not be cancelled, and its name be not removed from the list of registered vendors of DGS&D.
5. Another communication dated 28.06.2011 was also issued to the petitioner alleging that the petitioner was involved in the fraudulent act of claiming payments to the tune of Rs.21,64,65,477/- from the CCA, New Delhi against unauthorized supply orders for electric ceiling fans and exhaust fans. It was alleged that the aforesaid department of DGS&D, Silvassa had also confirmed of not having placed any such supply orders on the petitioner firm. The respondent by order dated 28.06.2011 sought to short close the petitioner's rate contract No.Ex. Fans/ME-2/RC-B 3050000/0911/02/NA820/4039 dated 20.10.2010 for Exhaust Fans.
6. The petitioner challenged the said short closure of the petitioner's rate contract and also raised a challenge to the show cause as issued by the respondent by filing W.P.(C.) No.5805/2011 before this Court. This writ petition was disposed of by this Court on 11.08.2011 by invoking the decision dated 28.07.2011 rendered in W.P.(C.) No.5223/2011 titled Allied Engineering Works v. Directorate General of Supplies & Disposal. The Court directed that till the respondents, in pursuance of the show cause notice, pass an order finding the W.P.(C.) No. 7951/2011 Page 3 of 15 petitioner guilty of the offence with which it is charged after granting the petitioner a hearing, the respondent shall not take any steps of blacklisting the petitioner and shall not give effect to the short closure of the contract till the passing of the order on the show cause notice. The said order of the Court was, however, not to come in the way of the respondents stopping payments for the supplies which were claimed to have not been made. The order to be passed on the show cause notice issued to the petitioner was not to be given effect for a period of one week from the date of communication to the petitioner, so as to enable the petitioner to avail all its remedies.
7. I may note that prior to the disposal of the said writ petition of the petitioner, the petitioner sent a reply to the show cause notice on 20.07.2011. Since the said reply has some bearing on the decision of this case, the same is reproduced herein below:
"Dear Sir, With reference to above said letter this is to inform that we had surrender the total amount which was mentioned in Silvassa case to the CCA Office, since we had surrender this amount in the CCA, so the further query to this regard may be dropped and the de-registration process of our firm and short-closing of rate contract may also be dropped.
It is our humble request if the same action is taken in our favour so, we will be able to continue the work with DGS&D with our sincerity and honesty.
We are innocent in this case and we are not W.P.(C.) No. 7951/2011 Page 4 of 15 involved in any activity of this Silvassa case.
This may be appreciated in this case and will be an example for other companies in future to recover the lost govt. funds.
Thanks, Yours faithfully, Empire Fantronics (I) Pvt. Ltd.
Director". (emphasis supplied)
8. After the disposal of the aforesaid writ petition, the respondent issued another communication dated 29.09.2011 to the petitioner. The respondent stated that the petitioner's reply is evasive. The respondent also stated that the petitioner had not denied specifically and categorically its involvement in financial embezzlement. The respondent communicated to the petitioner the list of 16 supply orders provided by the CCA, New Delhi, which were reported to be fake, against which the petitioner had claimed fraudulent payment and involved itself in financial embezzlement. It was also stated "Indentor vide their letter No.11-8(21)/Ele/2011/437 dtd. 27.4.11 has also confirmed that they have neither placed any supply order nor have received any material against these orders but you have claimed payment against the same".
9. The respondent also raised the issue of another supply order for electric ceiling fan 1200mm vide S/O W.P.(C.) No. 7951/2011 Page 5 of 15 No.30/2008/4031/4057/2/2/555 dt. 12.02.09 of NE Rly., Gorkhpur. It was stated that the consignee vide their letter no.10/Rej/30/2008/4031/4057/2/2/555 dated 08.02.11 had rejected the consignment on the ground that the petitioner had supplied uninspected goods, thus violating Clause 5.17.2 (c) of DGS&D Manual. The petitioner was given an opportunity to meet the charges by appearing in person on 12.10.2011.
10. On 12.10.2011, the petitioner sent another communication to the respondent in response to the second notice. In this response, the petitioner, inter alia, stated as follows:
"Sir, With due respect it is to bring some points to your kind notice as under:
1. Our company had supplied to Electricity Board, Silvassa and claim for payment from CCA is just amount Rs.1,52,67,902/- only.
2. We confirm that we had supplied the full material in good condition to the said department, as when we came to know about the scam our company had already withhold the said amount to CCA to avoid misuse of govt. funds, till the final decision came for the said case.
3. The said amount includes Rs.29,63,000/- (approx.) as the part of taxes like excise duty, vat etc. that we had deposited to the concern departments.
4. We also confirm that our company is neither directly involve in procuring the said supply W.P.(C.) No. 7951/2011 Page 6 of 15 order nor getting receiving of stores on inspection note from the said department.
5. We declare that our company is not involved in the said fraud either intentionally or unintentionally.
6. Still our company is in active position, as we are applying for inspection calls, dispatching materials etc.
7. We are supplying materials through DGS&D for last four years, we request your esteemed department to confirm from all our consignees about our performance, quality and quantity of the supplied material.
8. We confirm that we are innocent and we had not done any fraud.
9. We also assure to your esteemed department for our support, help etc whatever required for investigation for the said case". (emphasis supplied) The petitioner also submitted various documents by another letter of 12.10.2011 before the DDG (QA) N/Z.
11. Consequent upon the said hearing, the impugned order has been passed by the respondent, as aforesaid.
12. The submission of learned senior counsel for the petitioner, Mr. Neeraj Kishan Kaul is that the impugned order is cryptic and does not deal with the host of documents produced by the petitioner before the respondent to establish the factum that the goods supplied by the petitioner had been inspected by the inspection wing of the W.P.(C.) No. 7951/2011 Page 7 of 15 respondent, which is an independent wing. The respondent has also not considered the fact that the petitioner had paid a huge amount of excise duty amounting to Rs.29,63,000/- on the supplies stated to have been affected at Dadra & Nagar Haveli, Silvassa. He submits that the petitioner's case was that the petitioner had made supplies in response to 16 supply orders, in relation whereto it was claimed that these supply orders were fake, and the petitioner did not made any supplies. He submits that no finding has been returned in the impugned order in relation to, either the inspection notes, or the factum of the supplies not being made. He, therefore, submits that the impugned order is completely non speaking and illegal. He further submits that after the issuance of the initial show cause notice, by subsequent communication dated 29.09.2011, the respondent for the first time sought to raise the issue with regard to the supplies made to NE Railway, Gorakhpur. He submits that the allegations made by the respondent that the petitioner had supplied uninspected electric ceiling fans against SO dated 12.02.2009 in relation to the DGS&D rate contract dated 11.08.2008 to NE Railway, Gorakhpur is patently incorrect. In any event, there was no fraud involved, as the said goods had been rejected.
13. Mr. Kaul has also drawn my attention to the various provisions of the DGS&D Manual to emphasise the detailed procedure regarding inspection of the goods. He submits that a very detailed exercise is undertaken by the inspection wing of the respondent and only thereafter the goods are cleared.
W.P.(C.) No. 7951/2011 Page 8 of 15
14. Having heard learned senior counsel for the petitioner, I am of the view that there is absolutely no merit in this petition and the same is liable to be dismissed.
15. A perusal of the show cause notice, as initially issued, shows that the same lacked in material particulars. It only made general allegations against the petitioner without any specific facts and details. When the petitioner challenged the said show cause notice before this Court, it was left to the petitioner to raise the issue with regard to the show cause notice not being specific etc. before the concerned authority. Soon after the disposal of the writ petition, the respondent issued yet another notice dated 29.09.2011. This notice was very specific inasmuch, as, it made reference to the indentors letter dated 27.04.2011, whereby it was confirmed that they had not placed the 16 orders claimed to have been issued, and had also confirmed that they had not received any material against the so-called orders. The details of each of the said 16 fake supply orders were also provided to the petitioner.
16. Pertinently, even after receiving the first show cause notice, the response of the petitioner dated 20.07.2011 was not to deny the allegation of fraud and financial embezzlement. The response of the petitioner in its letter dated 20.07.2011 was that the petitioner had surrendered the total amount which was mentioned in the Silvassa case to the CCA office and that, therefore, further query in this regard may be dropped and de-recognition process and short closing of contract may also be dropped.
W.P.(C.) No. 7951/2011 Page 9 of 15
17. The stand of the petitioner subsequently taken in its letter dated 12.10.2011, and also before me - that the petitioners conduct was completely above board and the petitioner had made complete supplies against validly procured purchase orders is wholly inconsistent with the stance of the petitioner taken in its first communication dated 20.07.2011. The surrender of the amount in question, which was to the tune of Rs.1.50 crores, as is evident from the communication dated 20.07.2011 was unconditional and final, and not merely provisional till the matter is finally resolved.
18. The later conduct of the petitioner and the stand taken by it is even more interesting. In its communication dated 12.10.2011, the petitioner states that the petitioner came to know about the scam and that the petitioner had already asked the CCA to withhold the amount to avoid misuse of govt. funds till the final decision came in the said case. What the petitioner stated in para-4 of this communication is most startling. The petitioner states that "our company is neither directly involve in procuring the said supply order nor getting receiving of stores on inspection note from the said department". Therefore, the petitioner has washed its hands off and disowned the 16 purchase orders in question, as also the acknowledgement about receiving the stores on the inspection notes from the concerned department pertaining to the said 16 orders.
19. A perusal of the impugned order shows that Sh. Nitin Agarwal, Director and Sh. S.S. Mishra, QCI of the petitioner, during the course of personal hearing, stated "that they had neither received these orders W.P.(C.) No. 7951/2011 Page 10 of 15 from the Indentor/Consignee nor they had delivered the stores directly to them, but they informed that some agent had given these orders to them and in turn the material have also been handed over to same agent and agent further delivered receipted I/Notes to them for claiming payments".
20. Pertinently, it is not the case of the petitioner that in the impugned order, the submissions made by Sh. Nitin Agarwal, Director and Sh. S.S. Mishra, QCI have not been accurately recorded.
21. It is, therefore, abundantly clear that even according to its own admission, the goods were not delivered by the petitioner to the Indentor, i.e. Dadra and Nagar Haveli, Silvasa. The petitioner also does not have any personal knowledge about how the delivery notes, i.e. receipted inspection notes were obtained from the concerned department of DGS&D and the alleged indentor. The petitioner has resorted to mal-practice of involving agents for the purpose of procuring forged and fabricated purchase order and inspection notes with endorsement of delivery thereon. Chapter 13 of the DGS&D Manual, clause 13.1.3 provides that the supply order can be placed on any of the rate contract holding firm either directly by the authorized officers of the Indentors (known as direct demanding officers) or by the DGS&D, subject to such restriction as are mentioned in the rate contract. The petitioner, admittedly, does not claim that the purchase orders in question were directly placed upon it by the DDO or by the DGS&D.
W.P.(C.) No. 7951/2011 Page 11 of 15
22. The submission of the petitioner is that the respondent, before passing the impugned order, has not examined the documents relied upon the petitioner, is neither here nor there. This is for the reason that the fundamental documents namely, the supply orders themselves have been disowned by the petitioner. Not only that, even the inspection notes with the endorsement of delivery thereon have been disowned by the petitioner by pleading ignorance in relation thereto. The petitioner on its own admission, does not claim to have delivered the goods to the indentor, but claims to have delivered the same to some "agent", whom he does not name, and whose particulars he does not provide. It is not the petitioners case that the so-called "agent" is an authorized agent of either the DGS&D or of the indentor.
23. The submission of Mr. Kaul is that the two communications of the petitioner dated 20.07.2011 and 12.10.2011 do not appear to be happily worded. He submits that the aspect of the supplies made by the petitioner has not been examined. These aspects have been dealt with by me above. This Court is examining the impugned order in judicial review, and not as an appellate authority. The impugned order has to be tested on the basis of the material placed before the authority disposing of the show cause notice, and the explanation now sought to be furnished by the petitioner before this Court, by claiming that the petitioner said something in its communication, but intended to say something else, cannot be accepted. The material available before the respondent while passing the impugner order cannot be W.P.(C.) No. 7951/2011 Page 12 of 15 said to be insufficient or irrelevant to conclude that the petitioner had indulged in financial embezzlement and fraud. The proceedings for de- registration and short closure are not criminal proceedings, and the standard of proof applicable in these proceedings is not the same as is required to be attained in criminal proceedings. Even if one were to ignore the charge against the petitioner in relation to supply of uninspected stores to NE Railway Gorakhpur, the remaining allegation pertaining to 16 fabricated purchase orders is extremely serious, and is clearly established.
24. The finding returned by the respondent in the impugned order is supported by cogent and relevant evidence, and the order appears to be well reasoned.
25. Accordingly, the present writ petition is devoid of merit and is dismissed with costs of Rs.50,000/- to be paid to the Delhi Legal Services Committee. Costs be paid within four weeks.
26. It is made clear that any observation made in these proceedings shall not prejudice the case of either party in any criminal or other proceedings.
27. Learned counsel for the respondent has also drawn my attention to the Annexure P-18, which is a document issued by the ES Directorate of the DGS&D bearing No.ES/Vigilance/Daman & Diu/2011/XLPE, which enlists the names of 9 firms, including that of the petitioner, who are alleged to have similarly been involved in claiming payment on the basis of fake supply orders. This note records that the W.P.(C.) No. 7951/2011 Page 13 of 15 matter has been taken up for investigation by the Crime Branch of U.T. Administration and the case is being closely mentioned for taking necessary remedial steps. It is not disclosed by the respondent as to whether or not any FIR has been registered or any investigation has been carried out against any of the 9 suppliers by any investigating agency.
28. The wrongdoings in which the petitioner has been found to be involved pertain to the year 2008. Since then much water has flown. The nature of fraud unearthed is such that the involvement of some officers of the DGS&D and of the indentors cannot be ruled out. The petitioner himself admits to involvement of "agents". It is possible that the same modus operandi may have adopted by the petitioner and other suppliers in collusion and connivance with the officials of the concerned departments over the years. These aspects need thorough investigation by a competent investigating agency having pan India reach, as the pseudo indentors could be located anywhere in the country.
29. In my view, the aforesaid is an aspect which concerns larger public interest as public funds to the tune of few crores appear to have been siphoned off. As aforesaid, the involvement of the officers of the respondent, DGS&D and the Indentors cannot be ruled out as, it appears, payments have been released to the contractors on the basis of forged and fabricated documents. Whether or not, and if so, in what manner the investigation should be directed to be conducted by an investigating agency like the CBI in the present case, needs to be W.P.(C.) No. 7951/2011 Page 14 of 15 considered by this Court. To consider this aspect, let the matter be placed before the Division Bench dealing with the public interest litigation on 23.11.2011.
VIPIN SANGHI, J NOVEMBER 11, 2011 sr W.P.(C.) No. 7951/2011 Page 15 of 15