Bombay High Court
Mahimtura Consultants Pvt. Ltd vs Pimpri Chinchwad New Town ... on 8 September, 2017
Bench: B.R. Gavai
6283.17-WP-943
BDPSPS
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.6283 OF 2017
1] Mahimtura Consultants Pvt. Ltd. )
A company incorporated under )
the Companies Act, 1956, and having )
its Office at Unique House, 25, S.A. )
Brelvi Road, Fort, Mumbai - 400 001 ) ....Petitioner
V/s
1] Pimpri-Chinchwad New Town )
Development Authority having its )
address at New Administrtative )
Building, near Akurdi Railway Station )
Akurdi, Pune - 411 044 )
)
2] The Chief Executive Officer, )
Pimpri-Chinchwad New Town )
Development Authority, )
having address at New Administrative )
Building, near Akurdi Railway Station )
Akurdi, Pune - 411 044 )
)
3] The Executive Engineer, )
Pimpri-Chinchwad New Town )
Development Authority, having )
address at New Administrative building )
near Akurdi Railway Station, )
Akurdi, Pune - 411 044 )
)
4] State of Maharashtra, )
Through Government Pleader ) .....Respondents.
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Mr. Ravi Kadam, Senior Advocate with Dr. Birendra Saraf and Mr.
Brian A. D'lema and Mr. Aseem Naphade i/b M/s. D'lema and
Associates for the Petitioner
Mr. Nitin P. Deshpande, Advocate for Respondent Nos. 1 and 2
CORAM: B. R. GAVAI &
M.S. KARNIK, JJ.
DATE: 8th September, 2017
ORAL JUDGMENT: (Per B.R. Gavai, J.)
1] Rule. Rule is made returnable forthwith. Respondents waive
service. Heard by consent of parties.
2] The present Petition arises out of unusual facts. Petitioner -
Company is engaged in the business of Consultant Engineers and
Project Management Consultants. Respondent Nos. 1 to 3 had invited
tenders for appointing Project Management Consultant ("PMC") for
the project of constructing a building for the proposed Wakad Police
Station at Sector - 40 Wakad ("the said project"). In pursuance to the
said tender, the Petitioner had submitted bid and finally its bid came
to be accepted and the Petitioner was awarded work of PMC. On
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completion of the said work, the Petitioner raised its memo of bill for
an amount of Rs 5,57,456/-. However, it appears that, in the
meantime, the Petitioner had terminated one of its employees viz.
Mr. Uttam Chavan and he has addressed various complaints to various
authorities, including Respondent No.1. A communication was
addressed by Respondent No.1 on 27/05/2016 seeking certain
explanation from the Petitioner on the basis of the complaint made by
Mr. Uttam Chavan. The Petitioner, on 05/07/2016, responded to the
said communication informing therein that the Petitioner was
blacklisted on account of the misconduct of the said Mr. Uttam
Chavan, who was at the relevant time, an employee of the Petitioner.
The Petitioner further informed that the MSRDC had subsequently
revoked the blacklisting by its order dated 29/06/2016. An
information with regard to the same being sought by Respondent
No.1, MSRDC also informed Respondent No.1 regarding the said fact
vide communication dated 13/07/2016. On 05/12/2016, the
Petitioner had addressed a letter to Respondent No.2, requesting
release of 85% of the payment as per the memo of bill raised and also
requesting to retain the balance 15% until the issue was resolved.
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3] It appears that on 09/12/2016, Respondent No.1 addressed a
letter to one Professor B.G. Birajdar of College of Engineering, Pune
("COEP"), stating therein that the cost of project which was
initially estimated at Rs 2,14,70,990/- was subsequently revised to
Rs 2,70,65,622/- and, as such, an opinion of the said Mr. Birajdar was
sought with regard to increase in the cost of project.
4] Vide communication dated 27/01/2017, the Petitioner was
informed that the investigation was directed against him and pending
investigation, the Petitioner was debarred from participating in any of
the tenders issued by Respondent No.1. The Petitioner addressed a
communication on 30/01/2017 informing Respondent No.1 that the
complaint was made by one disgruntle employee and therefore the
communication dated 27/01/2017, which amounted to blacklisting,
should be forthwith withdrawn. The Petitioner addressed another
communication dated 09/02/2017 by which the Petitioner informed
Respondent No.1 that the material on the basis of which the action
was taken against the Petitioner was not supplied to the Petitioner. It
appears that, in the meantime, COEP has submitted its Report to
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Respondent No.1 on 23/02/2017. On 28/02/2017, Respondent No.1
addressed a communication to the Petitioner, stating therein that the
Petitioner had not disclosed the fact regarding it being blacklisted by
MSRDC. Vide said letter dated 28/02/2017, the Petitioner was
debarred for a period of three years.
5] The Petitioner, thereafter, vide communication dated
01/03/2017, gave reasons as to why cost of the project was increased.
The Petitioner, vide another communication dated 03/03/2017,
requested Respondent No.1 for personal hearing. On 09/03/2017,
personal hearing was given to the Petitioner, on which date, for the
first time, Report of COEP dated 23/02/2017 was brought to the
notice of the Petitioner. On 18/03/2017, the Petitioner gave a
detailed reply to counter the Report submitted by COEP. Vide another
communication dated 18/04/2017, the Petitioner was again
blacklisted.
6] Vide subsequent communication dated 24/04/2017, Respondent
No.1 issued show cause notice to the Petitioner, calling upon the
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Petitioner to show cause as to why a sum of Rs. 11,61,159/- should
not be recovered from the Petitioner. The Petitioner, therefore,
approached this Court by way of present Petition on 03/05/2017. On
17/05/2017, this Court passed an order, restraining Respondents from
taking any coercive steps against the Petitioner in pursuance of the
show cause notice dated 24/04/2017. The Petitioner also replied on
01/06/2017 to the show cause notice dated 24/4/2017 issued by
Respondent No.1.
7] In the meantime, the Petitioner had also approached Veermata
Jijabai Technological Institute ("VJTI"), requesting them to provide a
peer review of the work done by the Petitioner as Structural
Consultant and Contractor in respect of the said project. VJTI
submitted its Report on 05/06/2017, a copy of which is supplied to
Respondent No.1 on 07/06/2017.
8] Thereafter, the matter was adjourned from time to time. Since
no reply was filed on behalf of Respondents, this Court, vide Order
dated 07/08/2017 had issued a show cause notice to Respondent
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No.2, calling upon him to remain present in this Court and show cause
as to why action should not be taken against him for not filing the
reply though notice was accepted as early as on 17/05/2017.
Yesterday, when the matter was called out, Respondent No.2 was
personally present in Court and an affidavit was filed and also an
unconditional apology was tendered. We accepted the apology and
kept the matter for hearing on merits today inasmuch as
Mr. Deshpande, learned Counsel for Respondent Nos. 1 and 2 was not
ready to further proceed with the matter yesterday.
9] Mr. Kadam, learned Senior Counsel appearing on behalf of the
Petitioner, submits that the procedure adopted by the Respondents is
totally arbitrary. He submits that principles of natural justice and fair-
play have been totally given a go-by. He submits that the Petitioner is
a reputed Structural Consultant and one of the best, if not the best one
in the country. He submitted that it is totally improbable that, for a
small amount, the Petitioner, who employees around 300 engineers,
would indulge into any illegal activity. He submits that even perusal
of the allegations would reveal that the action of blacklisting was
6283.17-WP-943
totally unwarranted. He submits that even if the Report of COEP is
accepted, it will not make out a case for blacklisting. He submits that,
in any case, the Report of VJTI, which is one of the best Institutes in
the country, would show that no error was committed by the
Petitioner.
10] Mr. Deshpande, learned Counsel for Respondent Nos, 1 and 2,
however, submits that the issue is still pending consideration before
the authorities. He submits that the Report of VJTI has been sent to
COEP for getting its comments. He submits that since the matter is
still under consideration, an interference by this Court, at this stage,
would not be warranted.
11] As already discussed hereinabove, the present case not only
arises out of peculiar facts but also the acts, which, in our view, are
not permissible in law. In the present case, there is not one but three
orders/letters, first one dated 27/01/2017, second one dated
28/02/2017 and third one dated 18/04/2017, which were issued
purportedly after following the principles of natural justice inasmuch
6283.17-WP-943
as hearing was given on 09/03/2017. The matter does not rest there.
The Petitioner also faces fourth show cause notice, calling upon it to
show cause as to why the amount of Rs 11,61,159/- should not be
recovered from it.
12] By now, it is a settled principle of law that an order of
blacklisting has drastic consequences. It has a potentiality to throw
the businessman out of business. It has therefore been held that an
order of blacklisting should not be lightly passed. It has been held by
Their Lordships of the Apex Court that while taking recourse to
blacklisting, principles of natural justice and fair-play should be
adhered to. In any case, every action of the State or instrumentality of
the State within the meaning of Article 12 of the Constitution, is
required to be in consonance with the principles of natural justice, fair-
play, good conscience and equity.
13] Normally, this Court would not be going into a question as to
whether, on facts, the order passed by the authority was warranted or
not. As has been held by Their Lordships of the Apex Court in Tata
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Cellular vs. Union of India1, while examining the correctness of the
administrative action, this Court is not concerned with ultimate
decision but decision making process. However, in the present case,
we find that reference to the factual background would also be
necessary.
14] Undisputedly, the project, initially, was that of construction of a
four storied building for Police Station. However, during pendency of
the Project itself, Respondent No.1 decided that in order to enable the
entire FSI to be exhausted in future, RCC design should be designed
in such a manner that the building would be in a position to bear load
of ground plus six floors. The communication of Respondent No.1
addressed to COEP dated 09/12/2016 would itself reveal that, on the
site in question, there was a brick furnace as well as an artificial
filling. It would also further reveal that from the said land, initially,
pipe line of 600 milimitre diameter was going through, for supplying
water to Pimpri-Chinchwad Municipal Corporation. Apart from that,
since there was a level difference on the land, it was necessary to
construct a retaining wall. It further reveals that in the original
1 (1994) 6 SCC 651
6283.17-WP-943
estimate, the RCC design was estimated on the basis of traditional
methods and not on the basis of detailed analysis and, as such, there
has been increase in the cost of steel and concreting. However, it will
have to be noted that the Report was called from COEP by Respondent
No.1 on 09/12/2016. Even prior to the Report of COEP coming into
the hands of Respondent No.1, they have issued first blacklisting order
dated 27/01/2017. The only reason given in the said order is that one
Mr. Uttam Chavan had made a complaint before the authority. It
further states that there is a direction by the State Government to
inquire into the matter and till the inquiry is complete, Respondent
No.1 has taken decision to debar the Petitioner from participating in
any tender process.
15] Though the Petitioner had made representation immediately by
addressing letters dated 30/01/2017 and 09/02/2017, the second
blacklisting order/letter is issued on 28/2/2017. In the order,
Petitioner is informed that revised estimate of the work undertaken of
the said project was examined from COEP and COEP had found three
irregularities viz (i) while considering measurement of excavation,
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instead of taking individual footing size for excavation, the whole box
type excavation was taken into consideration, (ii) additional work
was undertaken without prior permission and (iii) RCC design
provided for additional steel. By the said order dated 28/2/2017,
Petitioner has been blacklisted for three years. It will be relevant to
note that the reasoning given by Respondent No.1 in the order/letter
dated 28/2/2017 is contrary to its own communication dated
09/12/2016. Perusal of the communication dated 09/12/2016 would
reveal that all this was done at the instance of Respondent No.1 itself
and for the same, Petitioner could not have been blamed.
16] Thereafter, on the basis of various representations made by the
Petitioner, Petitioner was given hearing on 09/03/2017 on which
date, for the first, time, Report of COEP dated 23/02/2017 was given
to the Petitioner. Petitioner has also given technical details as to how
the Report of COEP was not correct. However, without taking all that
into consideration, the third order/letter of blacklisting the Petitioner
was issued on 18/4/2017. In the said order/letter, for the first time,
Petitioner has been informed that when it had submitted tender, it
6283.17-WP-943
was already blacklisted and since the said information was not given
by the Petitioner, Petitioner is blacklisted for three years. It is to be
noted that before the said three orders/letters of blacklisting the
Petitioner were issued by Respondent No.1, letter of MSRDC dated
13/7/2016 was very much available with Respondent No.1 informing
Respondent No.1 that blacklisting order passed in the case of the
Petitioner by MSRDC was withdrawn. Learned Counsel for
Respondent Nos. 1 and 2 has not been in a position to point out any
requirement in the tender notice which requires the Petitioner to give
information with regard to blacklisting order being passed by any
other authorities. In any case, when all the aforesaid three
orders/letters were issued by Respondent No.1, the order of
blacklisting of the Petitioner by MSRDC was no more in existence.
17] Even from the Report of COEP, which is countered by the
Report of VJTI, it would not reveal that the Petitioner has indulged
into any gross or severe malpractices which would invite drastic order
like blacklisting. Assuming for a moment that some error has been
committed by the Petitioner, the same would, at the most, could be
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termed as an error of judgment in technical matters but not a malafide
act to enrich itself at the cost of public exchequer. The act, at the
most, that could be attributed to the Petitioner, is of providing more
steel in RCC, taking into consideration that the design of building has
changed from ground plus four floors to provide for further expansion
of ground plus six floors. Undisputedly, with the rise in number of
floors, the requirement of steel is increased. Perusal of document
dated 09/12/2016 i.e. letter addressed by Respondent No.1 itself,
would reveal that on account of situation at site like brick-furnacing,
artificial filling and passing of pipeline, certain additional measures
were required to be taken and retaining wall was to be constructed. In
this background, it cannot be said that the Petitioner has indulged into
any such activities which could be said to be amounting to
malpractices to deprive the Corporation of public money and enrich
itself.
18] Their Lordships of the Apex Court in Kulja Industries Limited vs.
Chief General Manager, Western Telecom Project Bharat Sanchar
Nigam Limited and Others1 had an occasion to consider the case of
1 (2014) 14 SCC 731
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blacklisting. It will be relevant to refer to para 20 of the said
judgment, which reads as under:-
"20. It is also well settled that even though the right
of the writ Petitioner is in the nature of a contractual
right, the manner, the method and the motive behind
the decision of the authority whether or not to enter
into a contract is subject to judicial review on the
touchstone of fairness, relevance, natural justice, non-
discrimination, equality and proportionality. All these
considerations that go to determine whether the
action is sustainable in law have been sanctified by
judicial pronouncements of this Court and are of
seminal importance in a system that is committed to
the rule of law. We do not consider it necessary to
burden this judgment by a copious reference to the
decisions on the subject. A reference to the following
passage from the decision of this Court in Mahabir
Auto Stores and Ors. v. Indian Oil Corporation Ltd.
[(1990) 3 SCC 752] should, in our view, suffice:
(SCC pp.760-61, para 12)
"12. It is well settled that every action of the
State or an instrumentality of the State in
exercise of its executive power, must be
informed by reason. In appropriate cases,
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actions uninformed by reason may be
questioned as arbitrary in proceedings under
Article 226 or Article 32 of the Constitution.
Reliance in this connection may be placed on
the observations of this Court in Miss Radha
Krishna Agarwal and Ors. v. State of Bihar
[(1977) 3 SCC 457]. In case any right
conferred on the citizens which is sought to be
interfered, such action is subject to Article 14
of the Constitution, and must be reasonable
and can be taken only upon lawful and
relevant grounds of public interest. Where
there is arbitrariness in State action of this
type of entering or not entering into contracts,
Article 14 springs up and judicial review strikes
such an action down. Every action of the State
executive authority must be subject to rule of
law and must be informed by reason. So,
whatever be the activity of the public
authority, in such monopoly or semi-monopoly
dealings, it should meet the test of Article 14
of the Constitution. If a Governmental action
even in the matters of entering or not entering
into contracts, fails to satisfy the test of
reasonableness, the same would be
unreasonable....... It appears to us that rule of
reason and rule against arbitrariness and
discrimination, rules of fair play and natural
justice are part of the rule of law applicable in
situation or action by State instrumentality in
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dealing with citizens in a situation like the
present one. Even though the rights of the
citizens are in the nature of contractual rights,
the manner, the method and motive of a
decision of entering or not entering into a
contract, are subject to judicial review on the
touchstone of relevance and reasonableness,
fair play, natural justice, equality and non-
discrimination in the type of the transactions
and nature of the dealing as in the present
case." "
In the said case, Their Lordships have also considered the issue of
proportionality. Though, in the said case, the Contractor therein was
blacklisted on the ground that he had fraudulently withdrawn huge
amount of money which was not due to it, in collusion and conspiracy
with the Officer of the Respondent - Corporation and was
permanently blacklisted, Their Lordships of the Apex Court found that
the order of permanent blacklisting was disproportionate and, as such,
remanded the matter to employer for considering reduction of period
of blacklisting. In the present case, as already discussed hereinabove,
we find that, at the most, what the Petitioner can be attributed, even
accepting the Report of COEP, is an error of judgment. In a matter
which requires highly technical expertise, one technical expert may
have one opinion, whereas another technical expert may have another
opinion. As already discussed above, we have two conflicting reports
in the present case; one of COEP and the another one from VJTI. It,
thus, cannot be said that the Petitioner had indulged in any such act
6283.17-WP-943
which can be said to be of criminal nature, so as to defraud the
employer or public exchequer. We are therefore of the considered
view that apart from the impugned orders/letters being in
contravention of principles of natural justice, fair-play and equity, they
are totally disproportionate to the act alleged against the Petitioner.
19] In the result, Petition deserves to be allowed. Rule is made
absolute in terms of prayer clauses (a) and (b).
(M. S. KARNIK, J. ) (B. R. GAVAI, J. )
