M/S. V.K. Dewan And Co. vs Municipal Corporation Of Delhi ...
1994 Latest Caselaw 345 Del

ORDER

1. Mr. V. K. Dewan and Co. by this writ petition has assailed the order of respondent No. 2, Delhi Water Supply and Sewage Disposal Undertaking (in short the D.W.S. and S.D.) thereby debarring the company for further tendering in the said undertaking for a period of three years.

2. Mr. Lekhi's challenge to the impugned order dated 23rd Nov. 1993, is on three counts firstly the respondent having exhausted the remedy under the terms of the contract and the rules, i.e. by cancelling the contract and by forfeiting the earnest money, could not resort to disciplinary action of debarring or banning the petitioner from further tendering. This amounted black-listing the petitioner which is not within the competence of the respondent. Secondly, neither the terms of the contract nor the rules, indicated in CPWD Manual of Instruction empower the respondent to take such disciplinary action. Disciplinary action adopted by ihe respondent is disproportionate to the offence alleged, therefore, irrational, arbitrary and illegal.

3. It is an admitted case of the parties that the petitioner is in the business of construction work in the State of Delhi and the respondent No. 2 executes construction work in the State of Delhi through contractors. The petitioner was awarded the contract for two works at Wazirabad and Rohini. These works were to commence and were to be completed within 12 months. The work did not commence. According to the petitioner he could not commence work because of the insurmountable hindrances created by the respondent. His case is that after the tender was accepted, requisite documents were submitted by him, but the respondent instead of acknowledging the same kept on asking for those very documents and in order to harm the petitioner the work awarded to him was cancelled and earnest money forfeited. It is also a fact on record that vide letter dated 8th November, 1983 only action communicated to the petitioner was cancellation of the contract and forfeiture of the earnest money under the authority of the Additional Commissioner (Water's) order dated 22nd October, 1993. It is on 23rd November, 1993 by the impugned letter action to debar him for further tendering for three years was communicated under the authority of the same Additional Commissioner (Water's) order dated 22nd October, 1993. It is also a fact on record that this letter dated 23rd November, 1993 was issued to various other Departments dealing with execution of construction work through contractors in Delhi namely, C.P.W.D., D.D.A. and M.C.D. etc. if it had been a simple ban imposed on the petitioner debarring him from tendering only with respondent No. 2. Undertaking then what prompted the respondent to send this communication to other Govt. Organisations which had nothing to do with this worker of the contract of the petitioner with respondent No. 2. For this action of the respondent an inference should be drawn that the respondent authority wanted other organisation to know that petitioner company was not worthy of awarding work. This action, according to Mr. Lekhi, amounts to projecting the petitioner bad in the eye of other organisations and thus depriving him work from other authorities. Hence it cannot be said that the action of the respondent against the petitioner was meant only for this undertaking. By circulating it and by giving it due publicity, it amounted to blacklisting the petitioner. The order may have been couched in such a language that it may not appear apparently blacklisting the petitioner, but by its conduct i.e. by circulating the said order and by giving due publicity to other departments with petitioner company, being a contractor, could have a dealing or may have to work, amounts to blacklisting. Even otherwise how far respondent can be justified in invoking this extreme step. Admittedly, petitioner had not commenced the work nor signed the agreement on a non-judicial stamp paper within 15 days of the acceptance of the tender. As per the terms of the contract for such failure respondent is vested with power to forfeit earnest money and cancel the work. Petitioner has his own story to tell for not commencing the work and for non singing. He blames the respondent authority for creating hurdles by not providing him working drawings and depriving him the right to have the labourers live at the site and by not permitting him to work on Sundays and holidays and normal working hours. Be that as it may, the fact remains in view of this disputed questions can the respondent on these unilateral finding condemn the petitioner without affording him opportunity. The answer will be in the negative. No one can be condemned unheard. But even to condemn him, the respondent must be competent under the terms of the contract or the rules to do so.

The special and general terms and conditions of the contract do not empower the respondent to take such disciplinary action over and above cancelling the contract and forfeiting earnest money.

4. Clause 20 of the general conditions of the tender document empowers the respondent to forfeit the earnest money if the tenderer after the acceptance of the tender fails to sign the contract agreement. Clause 20 is reproduced as under :

"Clause 20 -- After the acceptance of the tender, the tenderer will have to sign the necessary contract agreement within 10 days of the above intimation. In case of delay, the Engineer-in-charge reserves the right to forfeit the earnest money without any legal notice."

5. Clause 2 of the conditions of contract provides compensation for delay. It postulates that the contractor shall proceed with the work with all due diligence. The Corporation has been given the power to charge one per cent, or such smaller amount of the estimated cost of the work for every day that the work remains uncommenced. And under Clause 3, the Corporation has been empowered to rescind the contract for the breach committed by the contractor. Under Clause 21 of the conditions of Contract the contract can be rescinded and security deposit forfeited for sub-letting, bribing or if the contractor becomes insolvent. The said clause is reproduced as under :--

Clause 21 : Work not to be sublet contract may be rescinded and security deposit forfeited for sub-letting, bribing or if contractor becomes insolvent.

The contractor shall not assign or sub-let without the written approval of the Municipal Engineer. And if the contractor shall assignor sub-let this contract or attempt to do so or become insolvent, or commence any insolvency proceedings, or make any composition with his creditors or attempt to do so, or if any bribe gratuity, gift, loan, perquisite, reward or advantage, pecuniary or othewise, shall either directly or indirectly be given, promised, or offerred by the contractor, or any of his servants or agents to any public officer or person in the employ of the Corporation in any way relating to his office of employment, or if any such officer or person shall become in any way directly or indirectly interested in the contract the Municipal Engineer may thereupon by notice in writing rescind the contract and, the security deposit of the contractor shall thereupon stand forfeited and be absolutely that disposal of the Corporation and the same consequences shall ensure as if the contract had been rescinded under Clause 3 hereof, and in addition the contractor shall not be entitled to recover or be paid for any work there before actually performed under the contract.

6. And in case of dispute parties can involve arbitration Clause No. 25 provided in the contract. It is not disputed that vide order dated 13th August, 1991 respondent issued instruction order thereby conveying its decision to adopt CPWD Manual of Instructions and CPWD General Terms and Conditions, applicability of the same, so far as it did not differ with the rules of the respondent, was made known to all concerned. The reading of CPWD Manual of Instructions does not help the case set up by the respondent. It does not provide any disciplinary procedure as urged by the respondent. Mr. Sapra's, placing reliance on this document is misplaced. It is not a term of the contract. This can be inferred from the following sentence used in this note.

4. POST TENDER ENQUIRY REVISION OF SLAB RATES :--

(1) It has been noted that there is need to curb undesirable practices of tenderers to withdraw lower slab rates after tender opening. Suitable administrative action should also be taken in such cases.

The fact of and the reasons for suspension of business shall not be communicated to the firm concerned.

Orders regarding "Black-listing". "Suspension of Business" or "Banning" are confidential and are not to be communicated to the firms or to other.

Normally, orders of "Black-listing" and "Banning" do not affect current contracts pending execution by firm black-listed/banned. In the case of firms who have been punished on grounds of bribery, the discretion to cancel current contract is reserved under Clause 22 of the General Conditions of Contract.

7. It has also been expressed in this note that the punishment of "Black-listing" "Banning" and "Suspension of Business" is more severe than removal as the firm so dealt with not be eligible to do business with Government.

8. Reading of this Annexure R-3 relied by Mr. Sapra shows that it is neither a part of the terms and conditions of the contract nor of the CPWD Manual of Instructions. It is an office note or at best suggestion submitted by some official. This was not part of the contract nor applicable to the facts of this case.

9. The non applicability of the disciplinary procedure as prescribed and mentioned in Annexure R-3 can be seen by reading Clause 21 of the contract as reproduced above. For the act of bribery under the condition of contract the offence is rescinding of contract and forfeiture of the security. Whereas under Annexure R-3 it will lead to balcklisting. This shows that this Annexure R-3 has no relevance with the terms and conditions of the contract in question.

10. Mr. Sapra's reliance on some G.T.'s decision annexed with Annexure R-3 by no stretch of imagination can be called part of CPWD Manual of Instructions or terms and conditions of the Contract. Nor it empowers or authorises the respondent to take such stern action. In fact, Government's decision is that in case the contractor fails to commence the work recourse to fore it his earnest money be taken and that action under Clauses 2 and 3 of the Contract need not be taken. Disciplinary action could be taken wherever the circumstances so warrant. Therefore, it cannot be said disciplinary action is automatic in alt cases of non commencing the work. What were those circumstances which prompted the respondent to take this disciplinary action over and above cancellation of contract and forfeiture of earnest money have not been stated. There are umpteen number of letters written by the petitioner ventilating his grievances but without considering the same the extreme step has been taken. To my mind, the facts and circumstances of this case did not warrant the respondent such severe action, particularly when it has not stemmed out of the terms and conditions of this contract.

11. The grievance of the respondent that petitioner in spite of repeated reminders, and even after the show cause notice did not commence the work nor signed the agreement, to my mind, is a dispute which can be resorted by invoking clause 25 of the Agreement. Petitioner has tried to justify his action but this is not the proper forum to go into the disputed question of facts. However, this Court cannot over look the fact that the impugned order of 23rd November, 1993 was given due publicity by the respondent with ulterior motives. This is a misuse of the power of the respondent because of the publicity given to the order of debarring him from tendering in future. It amounts to blacklisting for which no show cause notice has been served. As observed, the contention of Mr. Sapra that show cause notice was served is without force, because that was only for the penalty of debarring and not for black-listing. Even otherwise, this punishment is disproportionate to the offence alleged against the petitioner. For three years he will be in hibernation even though for other contracts his case may be meritorious. In the words of M. N. Venkatachaliah, J. (as his Lordship then was) in the case of Ranjil Thakur v. Union of India, "the question of the choice and quantum of punishment is within the jurisdiction and discretion of the Court Martial. But the sentence has to suit the offence and the offender, it should not be vindictive of unduly harsh. It should not be so disproportionate to the offence as to shock the conscience and amount in itself to conclusive evidence of bias. The doctrine of proportionality, as part of the concept of judicial review, would ensure that even on an aspect which is, otherwise, within the exclusive province of the Court-Martial, if the decision of the Court even as to sentence is an outrageous defiance of logic, then the sentence would not be immune from correction. Irrationality and perversity are recognised grounds for judicial review."

12. Observation of the Hon'ble Supreme Court, quoted above, aptly apply to the facts of this case. The action of the respondent being not arising out of the terms and conditions of the Contract or the CPWD Manual of Instructions applicable to the facts of the case, therefore, can be called arbitrary, vindictive and bias. Even otherwise it appears to be disproportionate to the offence alleged particularly when action under the contract and the rules has already been taken by the respondents.

13. For the reasons stated above, the impugned order thereby debarring the petitioner from further tendering with respondent No. 2 for a period of three years is hereby quashed. The rule is made absolute. Parties are left to bear their own costs.

14. Order accordingly.