Bombay High Court
Mukand Poly Products vs Bharat Petroleum Corporation Limited on 8 October, 2024
Author: Amit Borkar
Bench: Amit Borkar
2024:BHC-OS:15646-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.3453 OF 2024
Digitally
Mukand Poly Products & Anr. ..... Petitioners
signed by
BASAVRAJ
BASAVRAJ GURAPPA
GURAPPA PATIL Vs.
PATIL Date:
2024.10.08
14:50:52
+0530 Bharat Petroleum Corporation Ltd. & Anr. ..... Respondents
Shri Pranjit Bhattacharya a/w. Shri Avdhoot Prabhu i/b. Lex
Services for the petitioners
Shri Pankaj Sawant, Senior Advocate a/w. Rutu Pawar i/b.
Pragnya Legal for respondent No.1 BPCL
CORAM: DEVENDRA KUMAR UPADHYAYA, CJ. &
AMIT BORKAR, J.
RESERVED ON : OCTOBER 1, 2024
PRONOUNCED ON : OCTOBER 8, 2024
JUDGMENT (PER : CHIEF JUSTICE)
1. Heard Shri Pranjit Bhattacharya, learned Counsel
representing the petitioners and Shri Pankaj Sawant, learned
Senior Advocate along with Ms. Rutu Pawar representing the
respondent No.1 - Bharat Petroleum Corporation Ltd.
(hereinafter referred to as the BPCL) and perused the records
available before us on this petition.
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(A) Challenge:
2. This petition under Article 226 of the Constitution of India
has been filed assailing the validity of an order dated 8 th
December 2023 passed by respondent No.1 whereby respondent
No.1 decided to ban business dealings with the petitioner and its
allied agencies and further debarred the petitioner from entering
into the contracts with respondent No.1 for a period of one year
(period of holiday listing).
Further prayer made in the writ petition is that by an
appropriate writ or direction, respondent No.1 may be restrained
from taking any action/coercive steps against the petitioner
pursuant to the show cause notice dated 21 st July 2023 and the
impugned order of debarring dated 8th December 2023.
(B) Brief facts :
3. Before adverting to the rival contentions made by the
learned counsel for the parties in support and opposition of the
writ petition, it is essential to note certain facts, which are as
under.
4. Petitioner No.1 is a partnership firm, registered under the
Indian Partnership Act, 1932 and is also an MSME industry
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dealing in Polyethylene pipes having its manufacturing unit at
Guwahati. Petitioner No. 2 has described himself as one of the
partners of petitioner No. 1.
5. Respondent No.1 issued notice inviting tender (tender
document) for procurement of Polyethylene (MDPE) pipe for
BPCL/BGRL CGD Projects. The bid due date for the said tender
was 16th August 2022 at 15:00 hours. The document specifically
provided that the policy to Purchase Preference linked with Local
Content (hereinafter referred to as the "PPLC") circulated by the
Ministry of Petroleum and Natural Gas, Government of India,
vide it's circular dated 23 rd February 2022 shall be applicable to
the subject tender. The relevant clause regarding applicability of
PPLC policy as provided for in the tender document, is quoted
hereunder: -
"PP-LC (revised) policy as per Circular from MOPNG ref No.FP-
20013/2/2017-FP-PNG-Part (1) (E-36682) dated 23.02.2022 shall be
applicable for this Domestic Tender. Only Class 1 and Class 2 local
suppliers, as defined in PPLC order, shall be eligible to bid for this
tender. Purchase preference shall be applicable to Manufacturers
classified as Class 1 Local Suppliers."
6. Thus, according to the afore-quoted clause, it was provided
by the tender document that only Class 1 and Class 2 local
suppliers as defined in PPLC policy shall be eligible to bid for the
tender and further that purchase preference shall be available to
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the manufacturers classified as Class 1 local suppliers.
7. Certain clauses of PPLC policy embodied in the circular
dated 23rd February, 2022 of the Ministry of Petroleum and
Natural Gas, Government of India, are also relevant to be noted.
The said PPLC policy is applicable in all public sector
undertakings under the Ministry of Petroleum and Natural Gas
and has been promulgated in tune with the Make in India (MII)
campaign involving oil and gas sector for providing certain
incentives for growth of goods and services with Local Contents
while implementing Oil and Gas projects in India. Clause 2.3 of
the PPCL policy defines "Local Content" to mean amount of value
added in India which shall be the total value of the item
procured minus the value of imported content in the item
concerned as a proportion of the total value in percentage,
unless otherwise prescribed by the Nodal Ministry. Clause 2.3 of
the PPLC policy is quoted hereunder:
"2.3 Local Content hereafter abbreviated to LC means the amount
of value added in India which shall, unless otherwise prescribed by the
Nodal Ministry, be the total value of the item procured (excluding net
domestic indirect taxes) minus the value of imported content in the
item (including all customs duties) as a proportion of the total value,
in percent."
8. As per the said PPLC policy, there are 3 types of suppliers
of goods/service provider viz. "Class I local supplier, "Class II
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local supplier" and "Non-local supplier". Clause 2.5 defines
"supplier of goods and/or provider of service" to mean a
business entity having capability of providing goods and/or
service in accordance with the business line and qualification
thereof. "Class-I local supplier" has been defined in clause 2.5 to
mean a "supplier, whose goods offered for procurement, has
Local Content equal to or more than 50%." "Class-II local
supplier" has been defined to mean "a supplier whose goods
offered for procurement, has Local Content more than or equal
to 20% but less than 50%. "Non-local supplier" is defined in
clause 2.5 of the PPLC Policy as a supplier, whose goods, offered
for procurement, has Local Content less than 20%. Clause 2.5 of
the PPLC policy is also extracted hereunder:
"2.5 Supplier of goods and/ or provider of service shall be a
business entity having capability of providing goods and/ or service in
accordance with the business line and qualification thereof and
classified as under:
'Class-I local supplier' means a supplier or service provider, whose
goods, services or works offered for procurement, has local content
equal to or more than 50% as defined under this Policy.
'Class-II local supplier' means a supplier or service provider whose
goods, services or works offered for procurement has local content
more than or equal to 20% but less than 50% as defined under this
Policy.
'Non-local supplier' means a supplier or service provider, whose
goods, services or works offered for procurement, has local content
less than 20% as defined under this policy."
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9. "Local Content" in goods has been defined in clause 2.9 of
PPLC policy which means use of raw materials, design and
engineering towards manufacturing, fabrication and finishing of
work carried out within the country. Clause 2.9 of the PPLC
policy is extracted hereunder:
"2.9 Local Content (LC) in Goods shall be the use of raw materials,
design and engineering towards manufacturing, fabrication and
finishing of work carried out within the country."
10. Annexure-I appended to the tender document contains
General Purchase Conditions. As per Clause 41 of the General
Purchase Conditions, policy of Holiday Listing was made
applicable to the subject tender and to all consequent orders,
contracts and purchase orders. Clause 41 of the General
Purchase Conditions runs as under:
"41. POLICY ON HOLIDAY LISTING:
The guidelines and procedures for Holiday Listing are available
separately in BPCL website and shall be applicable in the context of all
tenders floated and consequently all orders/ contracts/ purchase
orders. It can be accessed using the following link:
http://bharatpetroleum.in/pdf/holidayslistingpolicyfinal.pdf."
11. Reference by the learned Counsel for the Petitioner, during
the course of argument, has also been made to clause 9 of the
PPLC policy which makes certain provisions for imposing
sanctions on manufacturers not fulfilling the Local Content of
goods. Clause 9 of the PPLC policy is quoted hereunder: -
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"9 Sanction
9.1 The Procuring companies shall impose sanction on
manufacturers/service providers not fulfilling LC of goods/services in
accordance with the value mentioned in certificate of LC.
9.2 The sanctions may be in the form of written warning, financial
penalty and blacklisting.
9.3 In the event that a manufacturer or supplier of goods and/or
provider of services does not fulfill his obligation after the expiration of
the period specified in such warning, the procuring company can
initiate action for blacklisting such manufacturer/ supplier/ service
provider.
9.4 A manufacturer and/or supplier of goods and/or provider of
services who has been awarded the contract after availing Purchase
Preference is found to have violated the LC provision, in the execution
of the procurement contract of goods and/or services shall be subject
to financial penalty specified in clause 9.4.1.
9.4.1 The financial penalty shall be over and above the PBG value
prescribed in the contract and shall not be more than an amount equal
to 10% of the Contract Price."
12. The provision for holiday listing of vendors dealing with
respondent No.1 have been given in the policy for holiday listing.
Clause 4.1.1 and 4.2.12 of Holiday Listing Policy of BPCL are
relevant for consideration of the competing arguments made on
behalf of the parties, which are also extracted hereinbelow: -
"4. Holiday Listing:
4.1 Reasons for Holiday Listing: An Agency may be placed in
Holiday List for any one or more of the following circumstances:
4.1.1 If the Agency, in the context of its dealings with the
Corporation:
a. has indulged in malpractices;
b. has submitted fake, false or forged documents
/certificates
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c. Has substituted materials in lieu of materials supplied by
BPCL or has not returned or has unauthorized disposed off
materials/documents/drawings/tools or plants or equipments
supplied by BPCL.
d. Has deliberately violated and circumvented the provisions
of labour laws/regulations/rules, safety norms, environmental
norms or other statutory requirements.
e. has deliberately indulged in construction and erection of
defective works or supply of defective materials
f. Has not cleared previous dues to BPCL if applicable.
g. Has committed breach of contract or has abandoned the
contract.
h. Poor performance of the Agency in one or several
contracts;
i. Has not honoured the fax of award/letter of
award/Contract/Purchase order after the same is issued by
BPCL.
j. Withdraws/revises the bid upward after becoming the L1
bidder.
k. Has parted with, leaked or provided confidential/
proprietary information of BPCL to any third party without the
prior consent of BPCL."
"4.2.12 Ordinarily the period for which as Agency is Holiday
listed should not be less than 1 year (6 months in less serious
cases with proper justification) and should not exceed 3 years.
However, in extraordinary circumstances as mentioned below,
banning of 15 years can be done. The board guidelines for the
period of holiday listing based on the circumstances under
which they were put on holiday listing is as under:
S. Reasons for holiday listing Period
No. of
holiday
listing
1 Indulged in malpractices resulting in 15 years
financial loss to the Corporation
2 Submitted fake, false or forged documents/ 3 years
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certificates
3 has substituted materials in lieu of materials 15 years
supplied by BPCL or has not returned or has
unauthorisedly disposed off materials/
documents/ drawings/ tools or plants or
equipments supplied by BCL
4 Has deliberately violated and circumvented 3 years
the provisions of labour laws/ regulations/
rules, safety norms, environmental norms or
other statutory requirements
5 has deliberately indulged in construction and 3 years
erection of defective works or supply of
defective materials
6 has not cleared BPCLs previous dues if 1 year
applicable
7 has committed breach of contract or has 3 years
abandoned the contract
8 Poor performance of the Agency in one or 1 year
several contracts
9 has not honoured the fax of award/ letter of 1 year
award/ contract/ Purchase order after the
same is issued by BPCL
10 Withdraws/ revises the bid upwards after 1 year
becoming the L1 bidder
11 has parted with, leaked or provided 15 years
confidential/ proprietary information of BPCL
to any third party without the prior consent
of BPCL
12 If the Agency is or has become bankrupt, 3 years
OR is being dissolved OR has resolved to be
wound up OR if proceedings for winding up
or dissolution has been instituted against
the Agency
13 Transgression of Integrity Pact, which, in the 3 years
opinion of the Corporation, makes it
undesirable to deal with the Agency
13. The petitioner submitted its bid in respect of the subject
tender with a declaration of Local Content to be 82.36% by
means of a certificate dated 10th September, 2022 from a
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Chartered Accountant. The said certificate issued by the
Chartered Accountant, dated 10th September, 2022 submitted by
the petitioner with its bid is on record as Exhibit-G appended to
the petition. The petitioner qualified in the said tender and a
letter of acceptance was issued by respondent No.1 vide letter
dated 23rd January, 2023 informing the petitioner that its offer
was accepted on the terms and conditions of the tender
document.
14. Pursuant to acceptance of bid of the petitioner, a call of
order for procurement of Polyethylene pipes was issued by
respondent No.1 on 24th January 2023 whereby the petitioner
No.1 was required to supply 602 pipes in number, of different
diameter. For felicity, this procurement order dated 23rd
January, 2023 shall be referred hereinafter as Procurement
Order-1.
15. The petitioner, after receiving the Procurement Order -1,
is said to have made supplies of certain polyethylene pipes,
however, an email communication dated 22nd February, 2023
was sent by the Project Management Consultant, Tractebel, to
the petitioner requiring the petitioner to submit all the required
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documents to justify meeting the Local Content of 82.36%
against the dispatched quantity.
16. In response to the said email communication dated 22 nd
February 2023, the petitioner wrote a letter to respondent No.1,
dated 1st March, 2023 to establish that it had made Local
Content declaration. The project Consultant Management,
thereafter, vide email dated 3 rd March, 2023 required the
petitioner to provide relevant material test certificates along with
Batch numbers, for 206 MT of the content of the pipes procured
from local suppliers.
17. The petitioner is said to have communicated through
emails dated 23rd February 2023, 25th February 2023 and 3rd
March 2023 informing the respondent No.1 and the Project
Management Consultant that it had not received the billing &
shipping address and therefore, the petitioner was unable to
dispatch the materials. However, by means of an email dated 3 rd
March 2023, the Project Management Consultant asked the
petitioner to hold all the dispatches till petitioner's Local Content
documents were verified. Vide another email dated 9 th March
2023 from the Project Management Consultant, the petitioner
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was again directed to hold all dispatches till further advice.
18. Lastly; vide email dated 9 th March 2023 a detailed
communication was made to the petitioner wherein it was stated
that raw material procured by the petitioner from domestic
Polythene pipe manufacturer is sourced from outside India, i.e.
UAE and it cannot be considered as Part Local Content. By the
said email dated 9th March 2023, the Project Management
Consultant also informed the petitioner that a recommendation
has been made to respondent No.1 that the declaration of
meeting the Local Content of 82.36% by the petitioner against
the PPLC policy is not inline with Procurement Guidelines issued
by the Government of India in the Ministry of Petroleum and
Natural Gas. The said email communication dated 9th March 2023
is extracted hereinbelow: -
It is surprising to see your below appended email, wherein you are
using such statement that "due to lack of understanding from the
BPCL and PMC's side on our justification". We would like to bring into
your notice that the declaration submitted by you regarding the local
content in not complying to the PPLC policy.
1. Enclosed declaration (Local Content declaration) of Local
content submitted by M/s Mukund Poly products wherein bidder
has declared meeting the Local content of 82.36% against the
dispatched quantity.
2. Enclosed supporting documents (Local Content Docs)
submitted by M/s Mukund Poly products wherein it has been
established that out of 270 MT raw material ordered 206 MT
was procured from M/s Vishakha Pastic pipes Pvt. Ltd., & M/s
Veekay Plast who are Indian PE pipe manufacturer.
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3. Further the Raw material sourced by M/s Vishakha Pastic
pipes Pvt. Ltd., M/s Veekay Plast is imported and was procured
from Borouge (Aby Dhabi-UAE), refer documents enclosed thru
link.
4. Kindly refer to enclosed PPLC Policy (PPLC) which has
explicitly explained the Determination of Local Content of Goods
as below:
6. Determination of LC
6.1 LC of goods
6.1.1 LC of goods shall be computed on the basis of the
cost of dometic components in goods, compared to the
whole cost of product.
6.1.2 The criteria for determination of the local content
cost in the goods shall be as follows:
a) in the case of direct component (material), based on
country of origin;
b) in the case of manpower, based on INR component.
In view of above, it is evident that the raw material procured from the
domestic PE pipe manufacture is sourced from outside of India i.e.
UAE and cannot be considered as Part Local Content. Hence Tractebel
recommend BPCL that the declaration of meeting the Local content of
82.36% by M/s Mukund Poly Products against PPLC is not inline with
Procurement Guidelines issued by Government of India MOPNG.
Kindly submit your explanation to above if any, also until or unless
your explanation is justified we will not be able to lift any further
material."
19. It was also communicated to the petitioner that the
petitioner may submit explanation and unless and until the
explanation so submitted by the petitioner was justified, it will
not be possible to lift any further material.
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20. We may also make a reference, at this juncture, to an
email dated 11th March 2023, made to the Project Management
Consultant by the petitioner, wherein it is stated that it is
undisputed and is known to all that the raw material used for
production of polyethylene pipes is not manufactured in India
and therefore, the suppliers have other option of importing the
same directly or through Local Agents/Vendors. The petitioner
further stated in the said communication that the raw material
for manufacture of MDP pipes is not available in India and as
such, the "Make in India" clause or any further clause akin to the
same is redundant at best. The petitioner also stated by this
communication that the incorporation of such a clause in the bid
document serves no purpose and its feasibility, giving special
circumstances, is flawed at best. The relevant extract of email
made by the petitioner to the project proponent, dated 11 th
March 2023 is quoted hereinbelow: -
"1. Firstly, it is imperative to look at the feasibility of the Make in
India ("MII") Clause in the MDPE Pipe Industry. It is common
knowledge that the raw material used for production of MDPE Pipes is
not manufactured in India and the suppliers have either the option of
importing the same directly or through any local agent/vendor for the
same. This is undisputed by any party and is known to all players in
the industry. In view of the fact that the raw material for manufacture
of MDPE Pipes is not available in India, the "MII" Clause or any other
clause akin to the same is redundant at best. The incorporation of this
clause in the bid document serves no purpose and its feasibility given
the subject circumstances is flawed at best."
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21. Thus, we may note, at this juncture itself, that the
petitioner by the said email communication dated 11th March,
2023 had even questioned the existence of clause relating to
Local Content in MDP pipes and termed it to be flawed. Despite
having participated in the subject tender which clearly provided
that PPLC policy where the Local Content in a product has been
defined, was applicable. The petitioner, again wrote a letter on
21st March 2023 to respondent No.1 stating therein, inter alia;
that they had come to a conclusion that earlier declaration
submitted which depicted 82.36% Local Contents in the pipes to
be supplied, was not executable. The letter dated 21 st March,
2023 also contains a statement of the petitioner that
nonetheless, the petitioner still falls under the category of Class-
I local supplier, whose offered product contains Local Content
equal to or more than 50%. The petitioner, through the said
letter also communicated to respondent No.1 that they will only
be able to cater the first call up procurement order quantity
under PPLC policy on the basis of availability of raw material to
meet the requirement of Local Content in the pipes to be
supplied as Class-I local supplier.
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22. Thus, what we notice is that it is not only that the
petitioner by its email dated 11 th March 2023 sent to the Project
Management Consultant had questioned the condition relating to
Local Content and termed it to be redundant and flawed, but
also clearly stated in its communication dated 21 st March, 2023
that supply of the product with 82.36% Local Content, as per the
declaration made by the petitioner at the time of submitting its
bid, was not executable. By the said letter dated 21 st March
2023, the petitioner also communicated that it shall cater the
supplies only in terms of the provision which qualifies the
petitioner as Class-I local supplier, that is to say, it will be able
to supply the subject pipes with the Local Content equal to or
more than 50%. In other words, by the said letter dated 21 st
March, 2023, the petitioner, in no uncertain terms, expressed
its inability to make supply of the subject pipes with the Local
Content of 82.36%. By the said letter dated 21st March, 2023 the
petitioner also submitted a certificate from a Chartered
Accountant depicting the Local Content in the pipes to be
supplied by it as 51.45% only as against the Local Content of
82.36% in terms of the declaration made by the petitioner at the
time of submitting its bid pursuant to the subject tender.
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23. On 21st July 2023, a show cause notice was issued by
respondent No.1 calling upon the petitioner to submit its reply/
explanation as to why the petitioner may not be placed on
Holiday Listing and may not be barred from entering into any
contract with the BPCL. The said show cause notice stated the
grounds on which the intended action of debarment and putting
the petitioner on Holiday Listing was proposed. The notice clearly
stated that the petitioner had participated in the tender with a
declaration of 82.36% Local Content in the offered product and
accordingly, it had claimed purchase preference for being Class-I
local supplier.
The notice also stated that the petitioner was required to
submit a declaration supported by certificate from the Cost
Accountant/Statutory Auditor for maintaining the requisite
percentage of local product in the product supplied by it in every
invoice in order to meet the said requirement and to ensure that
the supplies made by the petitioner meet the stipulated Local
Content. The show cause notice dated 21st July 2023 also stated
that the petitioner vide its email dated 21 st March, 2023 had
informed that earlier submitted declaration of 82.36% Local
Content was not executable and that the product delivered by
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the petitioner had Local Content 51.45%. The show cause
notice also informed the petitioner that such an act on its part
was tantamount to committing breach of contract having
abandoned the contract and thus, entails penal provisions under
the Holiday Listing Policy and also penal provisions as contained
in the PPLC policy.
24. The petitioner responded to the aforesaid show cause
notice dated 21st July, 2023 vide its letter dated 31 st July, 2023
and stated, inter alia; that according to its interpretation of Local
Content criteria, procuring raw material from a local supplier was
not the only criteria for determining the Local Content and
therefore, a declaration was made by the petitioner at the time
of submitting its bid that the product to be supplied by it had
82.36% Local Content. In the reply it was also stated that as per
the interpretation of respondent No.1, the Local Content in the
goods supplied by the petitioner was 51.45% and thus, the
petitioner informed the respondent No.1 its inability to meet
82.36% Local Content criteria. In the reply, it was further stated
by the petitioner that on the basis of non-availability of raw
material locally to meet the Local Content, the petitioner had
informed that it could cater only the first call-up procurement
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order quantity under the PPLC policy and that though the
petitioner did not meet the requirement of Local Content in its
offered product however, the petitioner was fully compliant with
Local Content requirement to qualify it as a Class-I supplier. In
the reply dated 31st July 2023 submitted by the petitioner to the
show cause notice, it was also stated that the petitioner did not
dispute that a declaration of 82.36% was initially made by the
petitioner at the time of submission of the bid on the basis of the
petitioner's interpretation of Local Content criteria, however, the
petitioner, thereafter, had revised the declaration on the basis
of interpretation of respondent No.1 and since revised
percentage of Local Content was above 50% and therefore, the
petitioner was still able to meet the Local Content requirement
as Class-I supplier.
25. In sum and substance, in the reply submitted by the
petitioner to the show cause notice, the ground taken by it was
that even if the declaration by the petitioner during bid
submission was that the product offered by it contained 51.45%
Local Content, the tender would have been awarded to the
petitioner and therefore, the chances of succeeding the tender
would have been unaltered and accordingly, in view of the
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clarification submitted by the petitioner the outstanding amount
against the supplies made by it be released.
26. On receipt of the reply submitted by the petitioner and on
consideration thereof, the impugned order dated 8th December,
2023 banning the business dealings with the petitioner and
debarring it from entering into the contracts has been passed,
which is under challenge in this petition.
(C) Arguments made on behalf of the petitioner:
27. Shri Bhattacharya, learned Counsel representing the
petitioner, while impeaching the impugned order dated 8 th
December, 2023 has argued that the impugned order has been
passed not on the grounds spelt-out in the show cause notice
and further that it is in complete violation of policy of Holiday
Listing of the vendors.
28. It has been argued in this regard that the show cause
notice was issued on the ground that the declaration made by
the petitioner at the time of submission of bid reflected 82.36%
of the Local Content, however, subsequently, the petitioner
declared it to be 51.45%, which amounted to breach of
contract/abandonment of contract, but once the reply to the
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show cause notice was submitted, the ground was altered while
passing the impugned order and the reason indicated therein is
that the petitioner did not fulfill the supply of total awarded
quantity, which resulted in passing of the impugned order on
grounds not mentioned in the show cause notice which vitiates
the impugned order.
29. Shri Bhattacharya has also argued that non-fulfillment of
supply of the pipes as per the LOI quantity was never an issue
before respondent No.1 and accordingly, the impugned order,
since, is based on the said ground, is not liable to be sustained
as it is not open to respondent No.1 to open a new case which is
not mentioned in the show cause notice. It is further argued on
behalf of the petitioner that the petitioner never expressed its
inability to supply the balance quantity of the total contract value
and hence, the said reason occurring in the impugned order
makes the order of debarment illegal and not sustainable.
30. The learned counsel for the petitioner has also invoked the
doctrine of proportionality to submit that the declaration made
by the petitioner regarding the Local Content of its product at
the time of participating in the bid was based on its
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interpretation of the term "Local Content" for a Class -I supplier,
however, for some reason it was mis-interpreted by the
petitioner and hence, nothing can be attributed to the petitioner
amounting to mala fide or misleading the respondent No.1 and
accordingly, in absence of any element of mala fide or
misleading, the impugned order debarring the petitioner from
participation in the contracts is highly disproportionate.
31. The said submission has been made on behalf of the
petitioner in the backdrop of the settled position that blacklisting
any firm or company is a drastic action which amounts to almost
civil death of a contractor and accordingly any such drastic
measure has to be necessarily proportionate to the default of the
contractor. His submission is that considering the overall facts,
especially, the fact that the first declaration made by the
petitioner in respect of the Local Content can be said, at the
most, to be based on misinterpretation, blacklisting and
debarring the petitioner is not warranted.
32. It has also been argued on behalf of the petitioner that
even if the Local Content in the product offered by the petitioner
is equal to or more than 50%, the petitioner still qualifies as
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Class-I local supplier and thus, the petitioner would have been
awarded the tender for the reason that it was the only Class-I
local supplier who participated in the subject tender and hence,
the petitioner cannot be said to have contravened the PPLC
policy. Shri Bhattacharya has also attempted to argue that at the
most, the petitioner can be said to have contravened the PPLC
Policy and there does not exist any contravention of the
conditions of tender and therefore, the penalty as envisaged in
Clause 9.4 and 9.4.1 of PPLC policy would be attracted in the
instant case, which do not permit action of
debarment/blacklisting. Drawing our attention to the said clause
of PPLC policy, it has been argued that clause 9.4 provides that if
a supplier of goods who has been awarded contract availing
purchase preference is found to have violated the Local Content
provisions, he can be subjected to financial penalty as specified
in clause 9.4.1, which provides that the financial penalty shall be
over and above the PUG value prescribed in the contract and
shall not be more than the amount equal to 10% of the contract
price. It is, thus, his submission that even if the case setup by
respondent No.1 is found to be tenable, the provisions of clause
9.4 of PPLC policy, at the most, would be attracted, which may
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make the petitioner liable for financial penalty and not for such a
drastic action as debarment/blacklisting.
33. On the aforesaid counts, it has been urged on behalf of the
petitioner by Shri Bhattacharya that the impugned order dated
8th December 2023 passed by respondent No.1 be quashed and
writ petition be allowed.
(D) Arguments on behalf of the respondent - BPCL:
34. Shri Pankaj Sawant, learned Senior Advocate, opposing the
prayers made in the writ petition, has submitted that the entire
writ petition is highly misconceived and the facts and
circumstances of the present case clearly establish that it is not
only that the provisions of the PPLC policy justifying the
blacklisting are attracted in this matter, but also that the policy
of Holiday Listing of the vendors has been lawfully applied while
passing the impugned order.
35. It has been argued by Shri Sawant that Clause 9 of PPLC
policy does not provide only for imposition of financial penalty
but it provides for various counts of sanctions, including
blacklisting by the procuring companies in case supplier of the
goods does not fulfill the Local Contents of the goods in
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accordance with the value mentioned in the certificate of Local
Content. Referring to clause 9.1 and 9.2 of PPLC policy, it has
been argued on behalf of respondent No.1 that in case supplies
of a company are found not fulfilling the Local Content of goods,
it may entail various sanctions, which may be in the form of
written warning, financial penalty and blacklisting as well. Our
attention has also been drawn to clause 4.1.1(g) of the policy for
Holiday Listing which provides that the agency in context of its
dealings with the Corporation if found to have committed breach
of term of the contract or has abandoned the contract, it is liable
to be placed on Holiday Listing. He has stated that clause 4.1
provides for the reason on the basis of which agency may be
placed on the Holiday Listing, and one of such reasons is breach
of contract or abandonment of contract.
36. Our attention has also been drawn to clause 4.2.12 of the
policy for Holiday Listing wherein the period of Holiday Listing
has been prescribed and for breach of contract or abandonment
of contract, the period of Holiday Listing prescribed therein is
three years. He has, thus, submitted that though the petitioner
has clearly been found to have breached/abandoned the
contract, however, in place of putting the petitioner in the
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Holiday Listing for 3 years, the respondent has provided the
period of putting the petitioner on Holiday Listing to be only one
year and hence, the impugned order cannot be faulted with on
the ground of doctrine of proportionality.
37. It is his further submission that the principles of natural
justice in this case has been strictly followed inasmuch as that
the show cause notice issued to the petitioner, which preceded
passing of the impugned order, clearly mentioned the grounds
on which action was proposed against the petitioner. He has also
argued that the reasons given in the impugned order are
germane as they relate to the grounds indicated in the show
cause notice and hence, the submissions made by the learned
Counsel for the petitioner in this regard are not tenable.
38. Shri Sawant has taken us through the contents of the show
cause notice and also those of the impugned order and has
argued that the impugned order has been passed recording a
finding on the issues mentioned in the show cause notice. It has
also been argued on behalf of respondent No. 1 that the
petitioner does not dispute that in the declaration made by it at
the time of participating in the bid, the Local Content in the
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offered product was 82.36%, whereas, admittedly, the product
being now offered, after the contract, contains Local Content
only to the extent of 51.45%. Our attention has also been drawn
by Shri Sawant, representing the respondent No. 1 that the
petitioner in its email communication dated 11 th March 2023 has
even gone to the extent of terming the Local Content
requirement as redundant and further that the same is flawed.
39. Referring to the letter dated 21st March, 2023 of the
petitioner addressed to respondent No. 1, it has been contended
by the learned Counsel representing respondent No. 1 that the
petitioner himself has stated in the said letter that the work
order with 82.36% Local Content is not executable. He has
stated that the said letter itself states that the petitioner will not
be able to cater the requisite supply of the pipes only with the
Local Content of 51.45% and not with the Local Content of
82.36% as per its declaration made at the time of submitting its
bid. In his submission, Shri Sawant has, thus, stated that the
said letter dated 21st March, 2023 is nothing but a clear
expression on the part of the petitioner to have abandoned the
contract which amounts to breach of contract and thus, in terms
of the provisions contained in Clause 9.1 of the PPLC policy read
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with clause 4.1.1(g) and 4.1.12 of the policy for Holiday Listing,
which form part of the tender document itself, such an act on
the part of the petitioner attracted action as has been provided
for in the impugned order. It has thus been urged on behalf of
respondent No. 1 that the petition be dismissed at its threshold.
(E) Discussion:
40. It is not in dispute, as is apparent from the Certificate
dated 10th September 2022 of the Chartered Accountant which
was submitted by the petitioner at the time of participation in
the bid pursuant to the subject tender, that the petitioner had
declared that the pipes offered to be supplied by it contain
82.36% Local Content.
41. It is also not in dispute that the pipes supplied by the
petitioner pursuant to the procurement order issued by
respondent No.1 did not contain Local Content to the extent of
82.36%; rather, it contains only 51.45% Local Content as is
apparent from a perusal of the certificate dated 21st March 2023
issued by the Chartered Accountant which was enclosed by the
petitioner with its letter dated 21st March, 2023. From a perusal
of the said letter dated 21st March, 2023 it is also indisputably
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clear that the petitioner had, in no uncertain terms, expressed
its inability to execute the contract with supply of the pipes
having 82.36% Local Content; rather, the stand taken by the
petitioner is that the petitioner will be able to cater the supply
pursuant to the procurement order only with 51.45% Local
Content.
42. The petitioner has even gone to the extent of submitting,
as is clear from its communication dated 11 th March 2023 made
to respondent No.1, that because of certain reasons especially
because of fact that raw material for manufacturing of MDP pipes
is not available in India, the Make in India clause or any other
such clause is redundant and further that incorporation of such a
clause in the bid document does not serve any purpose. The
petitioner has described such a requirement as flawed.
Accordingly, from the contents of the letter dated 21 st March
2023 and email communication dated 11th March 2023 there is
no dispute that the petitioner is not a possessor of the pipes to
be supplied pursuant to the subject tender with Local Content of
82.36%. The pipes possessed by it contains the Local Content to
the extent of 51.45% only.
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43. It is also to be seen that instead abiding by supplying the
pipes offered by it with 82.36% Local Content at the time of
submission of bid, the petitioner has submitted a revised
declaration of the Local Content of its product which in our
opinion is impermissible. It was not open to the petitioner to
have altered the percentage of Local Content in its product to be
supplied for the reason that at the time of submission of its bid
pursuant to the subject tender, the declaration made by it
depicted the Local Content of 82.36% in the product offered by
it. Such an alteration or change in the percentage of Local
Content, in our opinion, is not permissible; rather, it not only
contravenes the provisions of the tender document but also the
provisions of the PPLC policy. The explanation attempted to be
given by the learned Counsel for the petitioner for the changed
declaration in respect of the Local Content is not tenable.
44. In any case, if there has been any ambiguity in the mind of
the petitioner as to how the Local Content in its product had to
be determined, such clarification ought to have been sought by
the petitioner before the tender process was finalized and not
thereafter.
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45. It is true that if the product offered by the petitioner
contains 50% or more than 50% Local Content in the product
offered by it, it still qualifies as Class-I supplier under the policy,
however, that in itself will not be sufficient for the petitioner to
take a plea that it has not contravened the contract.
46. We may note that once the petitioner expressed its inability
to supply the pipes with 82.36% Local Content and has rather
stated that it will cater the supplies pursuant to the procurement
order with its product having 51.45% Local Content, it will
clearly amount to abandoning the contract. Subsequent offer to
supply with the altered Local Content in its product and
petitioner's inability to make supplies with Local Content of
82.36%, in our opinion, necessarily amounts to breach of
contract. The tender was awarded to the petitioner on the basis
of declaration made by it at the time of submitting its bid which
depicted that the offered product by the petitioner contain
82.36% Local Content and not 51.45%.
47. As already noticed above, Clause 4.1 of the General
Purchase Conditions clearly provides that guidelines and
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procedures for Holiday Listing shall be applicable in the context
of the subject tender and all consequential orders/contracts/
purchase orders. Accordingly, applicability of the policy for
Holiday Listing is not in doubt. Clause 4 of policy for Holiday
Listing, as already quoted above, which prescribes the reasons
or grounds available for Holiday Listing, states that an agency
may be placed on Holiday Listing in anyone or more of the
circumstances enumerated therein. Clause 4.1.1 provides that if
the agency, in the context of its dealing with respondent No.1,
has committed breach of contract or has abandoned the
contract, such an act on the part of the agency shall result in the
agency being placed in the Holiday List. It is also to be noticed
that clause 4.2.12 prescribes period for which an agency can be
placed in Holiday List according to which in case any agency is
found to have committed breach of contract or to have
abandoned the contract, the agency can be placed in the Holiday
List for a period of 3 years.
48. We may also refer to clause 9 of PPLC policy which
provides for sanctions to be imposed by procuring companies on
the manufacturers/ service providers not fulfilling all
requirements of Local Content of goods/service in accordance
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with the value mentioned in the certificate of Local Content.
Clause 9.2 provides that sanction may be in different forms,
including in the form of written warning or financial penalty or
blacklisting. Accordingly, the emphasis by the learned Counsel
for the petitioner on clause 9.4 and 9.4.1 to submit that it is a
case, at the most, of violation of PPLC policy which entails
financial penalty only and not blacklisting, is absolutely
untenable. Clause 9.2 of PPLC policy itself provides various forms
of sanctions to be imposed by the procuring companies which
include blacklisting as well.
49. Once the petitioner, in its letter dated 21 st to March 2023
had unambiguously expressed its inability to execute the work
order by stating that such work order is not executable with the
product to be supplied with 82.36% Local Content, in our
considered opinion, such communication is nothing but
abandonment and breach of contract. Submission of the learned
counsel for the petitioner that letter dated 21 st March 2023
should be construed to mean the willingness on the part of the
petitioner to cater to the supply as per the procurement orders is
based on complete misreading of the contents of the said letter.
The intention expressed by the petitioner by the said letter dated
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21st March 2023 is clear without any ambiguity, according to
which the petitioner had expressed its willingness to cater to the
procurement order only with supply of its product with 51.45%
of the Local Content as per the certificate of the Chartered
Accountant dated 21st March 2023 enclosed with letter dated 21 st
March 2023 and not with the product having 82.36% Local
Content. In this view, such a statement made by the learned
Counsel for the petitioner that the communication/letter dated
21st March, 2023 should be construed as an expression of
willingness of the petitioner to make supply as per the contract,
is not acceptable. Supply, as per the contract, could be made
only with the product containing 82.36% Local Content which
the petitioner has stated in the letter dated 21 st March, 2023, is
not executable. Accordingly, in view of the aforesaid, we have no
hesitation to hold that it is a case where the petitioner had
committed breach of contract by abandoning the contract in the
light of the fact that the petitioner itself has stated that the
procurement order with 82.36% Local Content is not executable.
Thus, clause 4.1.1 of policy for Holiday Listing of the petitioner is
clearly attracted.
50. As regards the submission of the learned Counsel for the
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petitioner that the action of blacklisting being a drastic act, the
doctrine of proportionality needs to be applied while judicially
reviewing such measures taken by respondent No.1, we may
only state that an administrative action such as the one involved
in the present case does attract application of doctrine of
proportionality, we may, however in the same breath, also note
that clause 4.2.1 prescribes the period of Holiday Listing in case
of breach of contract or abandonment of contract to be 3 years,
whereas the petitioner has been debarred only for a period of
one year. Thus, even applying the doctrine of proportionality, we
do not find that the impugned order, in any manner, is
disproportionate to the default at the end of the petitioner.
51. Submission has also been made by the learned Counsel for
the petitioner that the impugned order dated 8th December 2023
is not based on the grounds stated in the show cause notice. The
said submission, however, is absolutely incorrect and hence, not
tenable. The show cause notice clearly mentioned that the
declaration made by the petitioner towards the Local Content in
the offered product was 82.36% at the time of submission of the
bid. The show cause notice also took note of certain
communications made by the petitioner wherein it was stated
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that the supply of product with 82.36% Local Content was not
executable. It also mentioned that in one of its communications
the petitioner had stated that its product had the Local Content
51.45% and thus, it would still fall under the category of Class-I
local supplier. The notice also clearly stated that the action on
the part of the petitioner amounted to abandonment and
committing breach of contract for the reasons given therein.
52. The impugned order rated 8th December 2023 notices the
admission made by the petitioner that while at the time of
bidding, the petitioner was very sure, based on its interpretation,
about the Local Content in the product offered to be 82.36%,
however, subsequently, the petitioner realised that the Local
Content clause of the policy was capable of another
interpretation that is different to what it had declared at the time
of submitting its bid. The impugned order, thus, also notices that
on account of the aforesaid facts, the petitioner was not able to
supply the material as against the procurement order which
amounted to breach/abandonment of the contract, accordingly,
there is no substance in the submission made on behalf of the
petitioner that the impugned order is not based on the grounds
disclosed in the show cause notice.
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(F) Conclusion:
53. For the facts narrated and the reasons given above, we are
of the opinion that the impugned order dated 8 th December 2023
does not suffer from any illegality, whatsoever so as to call for
any interference by this Court in exercise of its extraordinary
jurisdiction under Article 226 of the Constitution of India.
54. The petition, thus, lacks merit, which is hereby dismissed.
55. However, there will be no order as to costs.
56. Interim application, if any, stands disposed of.
(AMIT BORKAR, J.) (CHIEF JUSTICE)
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