M/S. Avr Technocrats Pvt Ltd. vs Union Of India
2022 Latest Caselaw 5030 AP

      THE HON'BLE SRI JUSTICE R.RAGHUNANDAN RAO

                WRIT PETITION No.19450 of 2022

ORDER:-

      The petitioner was registered, as a vendor, with the

Headquarters Eastern Naval Command vide Registration No.

HQENC/TECH/136/22 dated 17.02.2017. This registration was

done on the ground that he was the successful bidder and had

been awarded the contract, for supply of cars, on hire, initially

for the period 01.03.2018 to 28.02.2019. This period was

extended from time to time. In the course of this contract period,

the   petitioner    had   received    a   show   cause   notice    dated

26.08.2021 bearing No.TP/3090 from the CLOGO (Org Log) of

the    3rd      respondent      and       another    notice       bearing

No.CTP/436/HT/DISL/1 dated 26.08.2021 from the

Commanding Officer, Officer-In-Charge of the 3rd respondent. In

the first notice, the petitioner was called upon to show cause

why action, including invoking of performance of bank

guarantee and removal of the name of the petitioner from the

list of registered vendors, should not be undertaken for failure

to supply hired cars on 26.08.2021 without prior notice. The 2 nd

notice called upon the petitioner to show cause why penalties

should not be levied against the petitioner, for non supply of

vehicles on 26.08.2021 and why further action, including

termination of contract and black listing of firm, should not be

taken against the petitioner. The petitioner replied to the show

cause notice bearing TP/3090 by giving an explanation that the

continuous extension, of the hire contract, without hike in the

hire charges, had resulted in some of the drivers going on strike

without adequate information to the petitioner. As far as, the 2nd

show cause notice is concerned, the petitioner gave a separate

reply, accepting the levy of penalty and for deduction of said

amounts from the bills payable to the petitioner.

2. The 3rd respondent had issued a fresh tender, in

June 2022, for supply of cars to the various units, under the

Commander of the 3rd respondent. The petitioner had also

participated in this tender and has submitted his bid. At that

stage, the petitioner received a proceeding dated 08.06.2022

bearing No.TP/3015/DEVI TAXI & AVR/Tender Holiday. In this

proceeding, signed by the Captain Commander Logistic Officer

(Org Log) for the 3rd respondent, the petitioner was informed

that a tender holiday, for a period of one year, had been imposed

on the petitioner in accordance with Articles 3.4.1 and 3.4.2 of

the Defence procurement Manual 2009.

3. Aggrieved by the said order dated 08.06.2022, the

petitioner has approached this Court, by way of the present writ

petition.

4. Sri O.Manohar Reddy learned senior counsel,

appearing for Sri S.V.Ruthvik learned counsel for the petitioner

assails the impugned order on the following grounds:

1) Clause 3.4.1 and 3.4.2 of the Defence

Procurement Manual only provides for removal of

a vendor from the registered list and there is no

provision for black list or declaration of a tender

holiday. As such, the impugned order is without

any authority.

2) The impugned order is said to have been passed

in pursuance of the show cause notice bearing

No.TP/3090 dated 26.08.2021 and the

explanation given by the petitioner on the same

day. However, the impugned order contains

issues or facts which were not raised in the show

cause notice and the same is not permissible and

would amount to violation of principles of natural

justice.

3) The impugned order is also not in accordance with

clause 3.4.1 and 3.4.2 as the conditions set out in the

said clauses have not been met in the present case.

5. The respondents, after notice, have filed a counter

affidavit. It is stated that the petitioner, apart from the failure

to provide cars on 26.08.2021, had violated the conditions of

the hire agreement on various occasions and show cause

notices had also been issued to the petitioner, on these

occasions, pointing out the deficiencies in service and the

possibility of being removed from the list of registered vendors.

It is stated in the counter affidavit that the present order,

under challenge, was passed only after considering of these

issues.

6. Sri N.Harinath, the learned Assistant Solicitor

General would submit that the penalty of one year tender

holiday is lesser than the penalty contained in clauses 3.4.1

and 3.4.2 and the petitioner cannot have any objection to the

same. He would submit that the term "Tender Holiday" is

equivalent to being blacklisted or removed from the list of

registered vendors.

7. In reply, Sri O.Manohar Reddy, learned senior

counsel would rely upon the judgments of the Hon'ble Supreme

Court in Mohinder Singh Gill & Anr vs. The Chief Election

Commissioner1 to contend that the authority passing an order

cannot support the order by any additional affidavits or by

setting out facts which are not contained in the show cause

notice or the final order.

8. Sri O.Manohar Reddy, learned senior counsel also

relies upon the Judgment of Hon'ble Supreme Court in UMV

Technologies Private Limited vs. Food Corporation of India

and Another2, Jagdish Mandal vs. State of Orissa and Ors.,3

and Gorkha Security Services vs. Government (NCT of Delhi)

and Ors.,4 to contend that the affected party has to be given

adequate notice, setting out of the facts that are being

considered by the authority and the affected the party has to be

given an opportunity to place his defence before the affected

party can be blacklisted and prohibited from participating in

any tenders called by a State Authority.

9. There can be no quarrel with the proposition raised

by Sri O.Manohar Reddy. The only question would be whether

these propositions would apply to the present facts of the case.

1978 AIR 851, 1978 SCR (3) 272

2.(2021) 2 SCC 552 : 2020 SCC Online SC 934

(2007) 14 SCC 517 : 2006 SCC Online SC 1373

(2014) 9 SCC 105 : 2014 SCC Online SC 599

10. The show cause notice of 26.08.2021 reads as

follows:

1. Refer to the Contract Agreement CP 230796 dated 26 Jun

20 valid till 31 Aug 2018.

2. It has been brought to the notice of this Headquarters

that your firm has failed to supply the service of hired

cars on 26 Aug 21 without any prior notice, which is in

contravention to the terms and conditions of Contract.

3. In view of the foregoing, you failed to adhere to the

stipulated clauses as per the Contract agreement and

herby issued this Show Cause Notice, to allow you to put

forth the reasons/ written explanation (within 24 hours of

issuance of this notice) for non-compliance to the

contractual obligation and why penal action should not to

be taken against your firm including involving of PBG and

removal of your firms name from list of registered vendors

under ENC.

4. If no satisfactory reply/explanation is received/delivered to

this office by 1400 hrs on 27 Aug 21, necessary action shall

be taken against your firm without any further

information/notice.

11. Thereafter, the petitioner had given his explanation

to the show cause notice. The authority thereafter passed the

following order on 08.06.2022.

1. Refer to Contract Agreement CP 230796 dated 26 Jun

20 for hiring of Non-A/C cars for Command Transport

Pool, INS Circars extended up to 31 Oct 21 and following

letter:-

(a) HQENC show cause notice vide letter

No.TP/3090 dated 26 Aug 21.

(b) Your letter No.AVR/20-21/HQ/3 dated 26 Aug 21.

2. During the Annual Performance Review of firms in various

hired vehicles contracts concluded by this Headquarter/CT

Pool, the performance of your firm in aforesaid annual

contract for hired cars was observed to be unsatisfactory in

terms of quality/upkeep of cars, inconsistency in

availability of required number of vehicles contracted (on a

daily basis), uninformed discontinuation in services from

26 Aug 21 to 31 Aug 21 etc.

3. In view of the above, a Tender Holiday for a period of

one year is hereby imposed in accordance with the

provisions under Article 3.4.1 & 3.4.2 of Defence

Procurement manual 2009, across all categories of

transport hiring with immediate effect. This will entail no

further business relations (through new

tenders/contracts) from Eastern Naval Command units

(as listed in this letter below) during the aforesaid period.

4. Authority. Approval of CFA/FOCINC with occurrence of

IFA (ENC) on file TP/3015/Devi Tax and AVRT/tender

Holiday vide note 23 dated 03 Jun 22.

5. You are requested to acknowledge the receipt of this letter

within seven days from the issue date.

12. The Hon'ble Supreme Court in the case of UMC

Technologies Private Limited was considering the situation

where a show cause notice was issued, without setting out the

ground on which action was proposed and the penalty that was

proposed to be levied. In those circumstances, the Hon'ble

Supreme Court had held that unless the notice itself specifies

grounds on which, action is proposed to be taken and the

penalty that is proposed to be levied is set out, any further

action on the basis of such a show cause notice would have to

be set aside. In the present case, the ground on which action

was proposed has been set out and the proposed penalty is also

set out in the show cause notice. To that extent the ratio laid

down by Hon'ble Supreme Court may not be applicable to the

present case.

13. The judgment of the Hon'ble Supreme Court in

Gorka Security Services vs Government (NCT of Delhi) and

Ors., is also relating to a case where the show cause notice did

not set out the proposed penalty. As the proposed penalty has

been set out in the present case, the said judgment may not be

applicable to the facts of this case.

14. The judgment of the Hon'ble Supreme Court in

Gorka Security Services vs Government (NCT of Delhi) and

Ors., is also relating to a case where the show cause notice did

not set out the proposed penalty. As the proposed penalty has

been set out in the present case, the said judgment may not be

applicable to the facts of this case.

15. A perusal of both these proceedings would show that

the order under challenge contains issue and facts which were

not raised in the show cause notice. The learned Assistant

Solicitor General would submit that the issues raised in the

order and challenge are very much within the knowledge of the

petitioner and the petitioner despite receipt of notice in this

regard had not answered any of the said notices and

consequently, the said facts can be taken into account by the

respondents while passing the order under challenge.

16. The contention of the learned Assistant Solicitor

General would have to be negatived. The fact remains that the

order under challenge only refers to the show cause notice dated

26.08.2021 and the response of the petitioner to the said show

cause notice. In the absence, of a mention of, any of the other

proceedings on which the respondents are now seeking to rely

upon the contention raised by the learned Assistant Solicitor

General would have to be rejected.

17. The Hon'ble Supreme Court in the case of Jagdish

Mandal vs State of Orissa and Ors., had held that judicial

review of an administrative action is to prevent arbitrariness,

irrationality, unreasonableness, bias and malafides but the

Court would not go into the question of whether said decision is

sound or not. In the present case, the question that would arise

is whether the contents of the show cause notice and the order

under challenge meet this standard of conduct.

18. A perusal of the counter affidavit of the respondents

would show that there are various instances, according to the

respondents, where the petitioner had failed to meet the

necessary standard of service and said deficiencies in service

would amount to violation of the contract of service entitling the

respondents to take appropriate action. However, none of these

instances can be taken into account by this Court in view of the

Hon'ble Supreme Court in Mohinder Singh Gill & Anr vs. The

Chief Election Commissioner mentioned above.

19. For the aforesaid reasons, this writ petition is

allowed by setting aside the order dated 08.06.2022 bearing

No.TP/3015/DEVI TAXI & AVR/Tender Holiday, leaving it open

to the respondents to take such action as deemed fit in relation

to various deficiencies of service pointed out by respondents in

their counter affidavits. Needless to say, the same shall be done

after appropriate notice is issued to the petitioner setting out all

the deficiencies in service and giving an opportunity to the

petitioner to give his explanation to the said deficiencies. There

shall be no order as to costs.

Miscellaneous petitions, pending if any, in this Writ

Petition shall stand closed.

___________________________________ JUSTICE R.RAGHUNANDAN RAO Date : 05-08-2022 RJS

THE HON'BLE SRI JUSTICE R.RAGHUNANDAN RAO

WRIT PETITION No.19450 of 2022

Date : 05-08-2022

RJS