Mata Di Electricals vs Chhattisgarh State Ware Housing ...
2021 Latest Caselaw 3735 Chatt

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                                                                     AFR



          HIGH COURT OF CHHATTISGARH, BILASPUR
                    Writ Petition (C) No. 3211 of 2021

 Mata Di Electricals through its Partner Devendra Jain S/o Shri Ugam
 Raj Jain, aged about 35 years, R/o Near Tehsil Office Rajim, District
 Gariyaband, Chhattisgarh.
                                                            ---- Petitioner
                                 Versus
 1. Chhattisgarh State Ware Housing Corporation, through Managing
    Director, Sector-24, Near Jhanjh Lake, Atal Nagar, Raipur, District
    Raipur, Chhattisgarh.
 2. Manager, Technical, Chhattisgarh State Ware Housing
    Corporation, Sector 24, Near Jhanjh Lake, Atal Nagar, Raipur,
    District Raipur, Chhattisgarh.


                                                         ---- Respondents

(Cause Title taken from Case Information System)

For Petitioner : Mr. Anup Majumdar, Advocate.

For Respondents : Mr. Animesh Tiwari, Advocate.

Hon'ble Mr. Arup Kumar Goswami, Chief Justice Hon'ble Mr. N.K.Chandravanshi, Judge

Order on Board

Per Arup Kumar Goswami, Chief Justice

16/12/2021

Heard Mr. Anup Majumdar, learned counsel for the petitioner as

well as Mr. Animesh Tiwari, learned counsel for the respondents.

2. A notice inviting tender (NIT) dated 02.05.2020 was issued by the

respondents for supplying Power Sprayer (Petrol) in terms of the

specifications provided in the NIT. On evaluation of the tenders, the bid

of the petitioner was accepted. On 26.06.2020, the petitioner was

informed that before execution of the pre-integrity contract and

agreement, the officers of the Corporation will inspect the stores and the

Power Sprayer (Petrol) which were to be supplied. A date for inspection

within seven days of the receipt of the letter was requested.

Subsequently, in supersession of the letter dated 26.06.2020, a work

order dated 10.07.2020 came to be issued instructing the petitioner to

supply 35 numbers of Power Sprayer (Petrol) as per the NIT conditions.

Subsequent thereto, on 13.07.2020, a pre-contract integrity pact and an

agreement were executed in between the petitioner and the respondent

No. 2.

3. By a letter dated 08.10.2020, the petitioner was informed that

on an inspection being carried out on 28.08.2020, it was found that the

Power Sprayer (Petrol) available with the petitioner was not in accord

with the specifications mentioned in the work order and the NIT, and

accordingly, the petitioner was directed to rectify the Power Sprayer

(Petrol) in accordance with the specifications within seven days. It was

also indicated in the said letter that on failure to take appropriate action

within the time limit specified, appropriate action would be taken as per

clause 12(iv)(g) of the NIT.

4. It is stated by the petitioner that though a letter dated

15.10.2020 was issued by the petitioner requesting inspection of the

Power Sprayer (Petrol) procured by the petitioner, none came for

inspection of the same and thereafter, surprisingly, by an order dated

21.10.2020, the respondents cancelled the contract of the petitioner,

forfeited the earnest money deposit and disqualified the petitioner from

participating in any tender under the respondents in future.

5. The relevant portion of translated version of the order dated

21.10.2020 (translated by the petitioner) reads as follows:

"Chhattisgarh State Warehousing Corporation Head Office village Jhanjh, Sector 24, Atal Nagar, Nawa Raipur (CG) Date- 21.10.2020 To,

M/s. Mata Di Electricals Near Tahsil Office, Fingeshwar Road, Rajim, District Gariyaband (CG)

Subject: Regarding purchase of 35 Nos. Power Sprayer

(petrol)

Reference: (1) Supply Order No. 0-7068 of this office

dated 10.07.2020

(2) letter No. 9332 of this office dated

08.10.2020.

You were given order to supply 35 Nos. of Power

Sprayer (Petrol) under the referred supply order under the

subject. As per your letter No. MDE 351 dated

25.08.2020, request was made to the Corporation for

inspection. Consequent to the said letter, as per the letter

No. 8051 dated 26.08.2020 of the Headquarters,

inspection was done by the officers of the Headquarters

by visiting the specified place. In the inspection, the

officers found that the Power Sprayer (Petrol) prepared

was not as per the terms and specifications of the

agreement executed.

With reference to aforesaid, vide letter No. 2 referred

above, you were instructed to prepare the material

according to the supply order and after keeping it ready

for pre-supply inspection, you were to inform this office

within 7 days. But till date, no correspondence has been

made from your side.

Therefore, as per clause No. 12 (iv)(g) at page No.

21 of the tender sheet, and clause No. 17(iii) at page No.

25, the contract is being cancelled and to compensate the

loss incurred by the Corporation, your earnest money is

being forfeited and in future, you will be ineligible to

participate in any tender of the Corporation.

Sd/-

Managing Director 21.10.2020"

6. Mr. Majumdar submits that though prayer is made for setting

aside of the order dated 21.10.2020 in the writ petition, the petitioner is

not pressing for setting aside the order of cancellation of the contract.

The petitioner is aggrieved by forfeiture of the earnest money as well as

disqualifying the petitioner from participating in future tender. It is

submitted that in the NIT as well as in the agreement, there is no

provision for blacklisting under any eventuality and therefore, debarring

the petitioner from participating in future contract of the respondents is,

per se, illegal and arbitrary and the same cannot be countenanced in

law. It is also submitted that no notice was given to the petitioner

requiring him to show cause as to why the petitioner shall not be

disqualified from participating in the tender of the Corporation, that too,

permanently which is, in essence, blacklisting of the petitioner from

participating in future contracts.

7. Mr. Animesh Tiwari, learned counsel for the respondents

submits that it is not correct to say that no notice was issued as

contended by the petitioner. He submits that a notice was issued on

08.10.2020. Placing reliance on a judgment of the Hon'ble Supreme

Court in Kulja Industries Limited v. Chief General Manager, Western

Telecom Project Bharat Sanchar Nigam Limited & Others, reported in

(2014) 14 SCC 731, it is submitted by him that the power to blacklist a

contractor is inherent with a party allotting the contract and therefore,

merely because there was no provision of blacklisting in the NIT or the

agreement, the same will not preclude the Corporation from blacklisting

a contractor if the need arises in the interest of the Corporation. So far as

return of earnest money is concerned, it is submitted that when the

contract has been cancelled and the petitioner is not assailing the said

cancellation, no question arises for refund of the earnest money.

8. We have considered the submissions of the learned counsel for

the parties and have perused the materials on record.

9. In Kulja Industries Limited (supra), the Hon'ble Supreme Court

has observed that power to blacklist a contractor is inherent in the party

allotting the contract as 'blacklisting' signifies a business decision by

which the party affected by the breach decides not to enter into any

contractual relationship with the party committing the breach. While

between two private parties the right to take any such decision is

absolute and untrammelled by any constraints whatsoever, and the

freedom to contract or not to contract is unqualified, any such decision is

subject to judicial review when the same is taken by the State or any of

its instrumentalities. In other words, any such decision will be open to

scrutiny not only on the touchstone of the principles of natural justice but

also on the doctrine of proportionality. A fair hearing to the party being

blacklisted thus becomes an essential pre-condition for a proper exercise

of the power and a valid order of blacklisting made pursuant thereto.

10. Therefore, the argument of Mr. Majumdar that the petitioner

could not have been debarred from participating in future contracts with

the respondents in absence of any provision enabling blacklisting, is

without any merit.

11. However, a perusal of the letter dated 08.10.2020, on which

reliance is placed by Mr. Tiwari to contend that notice was given to the

petitioner with regard to proposed blacklisting, goes to show that the said

notice did not indicate that the petitioner is asked to show cause as to

why he shall not be ineligible to participate in any tender of the

respondents. The notice refers to clause 12(iv)(g) dealing with 'failures

and termination', which have no clause for disqualification in future.

12. As no order of blacklisting can be validly passed without

affording adequate opportunity of hearing, debarring the petitioner, that

too, for all times to come, from participating in contracts under the

respondent, is wholly arbitrary and illegal and therefore, such stipulation

in the order dated 21.10.2020 is set aside. The respondents are,

however, at liberty to proceed in accordance with law, if so advised.

11. So far as the prayer for return of earnest money deposit is

concerned, since the work order has been cancelled and the same is not

being questioned, issuing a direction for return of earnest money deposit

does not arise.

12. The writ petition stands disposed of in the above terms. No

cost.

                    Sd/-                                      Sd/-
             (Arup Kumar Goswami)                        (N.K.Chandravanshi)
                CHIEF JUSTICE                                  JUDGE




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