Nisa Industrial Services Private ... vs State Bank Of India
2021 Latest Caselaw 8251 Bom

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               IN THE HIGH COURT OF JUDICATURE AT BOMBAY

                     ORDINARY ORIGINAL CIVIL JURISDICTION

                        WRIT PETITION (L) NO.12341 OF 2021

Nisa Industrial Services Pvt. Ltd. And Anr.      ..     Petitioners
       v/s.
State Bank of India                              ..     Respondent
                                     ....
Mr. Sharan Jagtiani, Senior Advocate, a/w. Mr. Renjit Nair, Ms. Gayatri
Ramchandran and Mr. Altamash Qureshi, i/b. Acquity Law, LLP, for the
Petitioners.

Mr. Rathina Maravarman, for the Respondent.
                                  ....
                          CORAM: S.C. GUPTE &
                                    M.S. KARNIK, JJ.

DATE : 22 JUNE, 2021.

(Oral Judgment) Per S.C. Gupte, J.:

. Heard learned Counsel for the Petitioners and learned Counsel for the Respondent Bank. The subject matter of controversy in the present petition concerns debarment of Petitioner No.1, who was the Respondent bank's contractor for e-surveillance of over 10,000 ATMs of the bank spread all over the Country.

2. The Request For Proposal (RFP) for surveillance solutions, under which Petitioner No.1 submitted its bid and, in response to which it was declared as the successful bidder and awarded the contract, clearly mentions a stipulation under which Earnest Money Deposit (EMD) submitted by the bidder was liable to be forfeited inter alia if the

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successful bidder failed to sign the contract or furnish performance bank guarantee within the period specified in the RFP/Purchase Order. If EMD was forfeited for that reason, the concerned bidder was liable, in the sole discretion of the bank, to be debarred from participating in the RFPs floated by the bank in future.

3. It is not in dispute that though Petitioner No.1 was the successful bidder, it failed to furnish a performance bank guarantee. In its affidavit, Petitioner No.1 has come up with reasons why the performance bank guarantee could not be furnished by it, claiming that these reasons amounted to an adequate justification for not furnishing the guarantee. The fact remains that though there may be contractual disputes raised by the Petitioners concerning the Respondent bank's action of termination of the contract as well as debarment of Petitioner No.1 from participating in future RFPs floated by the bank, there is nothing to indicate that such action was actuated either by malafides or amounted to a colourable exercise or a capricious or arbitrary act. The bank has not only given due opportunity to Petitioner No.1 to show cause to its proposed action of debarment and considered submissions made in response, it has passed a detailed speaking order dealing with each of the submissions made by the Petitioners. It has inter alia been considered by the Respondent bank that the performance bank guarantee not only was not submitted within the stipulated time, but there were several opportunities given to the Petitioners to submit the same. The Respondent bank has referred to the letters, such as letters dated 23 January 2020, 26 February 2020, 13 March 2020, 17 June 2020, 20 July 2020 and 6 October 2020, in addition to the meetings held by the Petitioners with senior officials of the bank,

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calling for the guarantee. In other words, what the bank has considered is that despite making various requisitions for furnishing of a performance bank guarantee and giving time to Petitioner No.1 to do so, the same was not furnished by the Petitioners. Additionally, the Respondent bank has considered that due to the default on the part of the Petitioners, which inter alia resulted into termination of the contract, about 8075 ATM sites of the bank were subjected to risk and that this amounted to a serious lapse or default requiring a stringent action on the part of the Respondent. Despite the Petitioners' default, the debarment order is only in respect of the Respondent bank, which is not intended to affect the Petitioners' dealings with the other banks. Besides it is operative only for a period of two years. In other words, the bank does not appear to have exercised its discretion in a capricious or arbitrary manner or exhibiting any malafides, even whilst proposing the action. If that is so, there is no case for the writ court to interfere with such action in a judicial review under Article 226 of the Constitution of India.

4. Mr. Jagtiani, learned Senior Counsel for the Petitioners, relies upon the judgment in the case of J.K. Surface Coatings Pvt. Ltd. vs. Oil and Natural Gas Commission 1 to contend that a banning order cannot be passed merely due to contractual disputes. The Division Bench of our Court deciding that case has held that some contractual violations, for redressal of which an efficacious remedy was available, could not be the only ground for passing the banning order; considering that a blacklisting/banning order virtually leads to civil death of the person blacklisted/banned, there had to be something more than just contractual disputes. The facts of the case of J.K. Surface Coatings, which invited 1 2016 SCC OnLine Bom 9281 : (2016) 6 AIR Bom R 679

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these observations, are clearly distinguishable. In the first place, the contractor had not only completed the work and was issued a completion certificate, but a survey carried out by the employer after completion of the contract had found the work to be satisfactory. Sometime later, discrepancies were allegedly found in the work billed for by the contractor, based on which bank guarantees submitted by the contractor were invoked. That was about one full year after the completion certificate was issued to the contractor. It was only thereafter that the show cause notice for blacklisting him and inquiry into the alleged discrepancies were initiated by the employer. The contractor denied the alleged discrepancies. These facts do indicate a pure contractual dispute. Secondly, the judgment does not indicate any contractual stipulation providing for the consequence of blacklisting for the particular discrepancy alleged against the contractor. In our case, there is a specific contractual provision for banning the contractor from participating in future RFPs of the employer if Performance Bank Guarantee was not submitted after successful award of the earlier contract. Petitioner No.1 had admittedly not submitted such guarantee. It is open in every case for a contractor to raise contractual disputes and oppose a blacklisting or banning order, even if the same is otherwise sustainable, based on such disputes. The employer's action in that case is not based on any contractual dispute; it is based on a stipulated deficiency or default. Contractual disputes raised in the matter would be part of the contractor's defence. Such disputes, by themselves, cannot have the effect of ruling out the blacklisting or banning order proposed by the employer. The judgment of J.K. Surface Coatings is not an authority for the proposition that wherever there are contractual disputes raised by the contractor, a

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blacklisting or banning order cannot follow. A blacklisting order passed for default/lapse in a construction or supply contract is bound to have some contractual flavour; it would after all be always a case of breach of contract and if contested, give rise to contractual disputes. That, by itself, is no ground to interfere with the order.

5. There is, accordingly, no merit in the petition. The petition is dismissed.

(M.S. KARNIK, J.)                                      (S.C. GUPTE, J.)




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