M/S Goldy Construction Company vs Municipal Corporation Of Delhi
2011 Latest Caselaw 2462 Del

         *IN THE HIGH COURT OF DELHI AT NEW DELHI

                                         Date of decision: 9th MAY, 2011

+                              W.P.(C) 9051/2008

%        M/s GOLDY CONSTRUCTION COMPANY .... Petitioner
                      Through: Mr. Moni Cinmoy, Adv.

                                   Versus

         MUNICIPAL CORPORATION OF DELHI ....Respondent
                     Through: Mr. Ajay Arora & Mr. Sarfraz
                              Ahmed, Advocates
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1.       Whether reporters of Local papers may
         be allowed to see the judgment?                   No

2.       To be referred to the reporter or not?            No

3.       Whether the judgment should be reported           No
         in the Digest?

RAJIV SAHAI ENDLAW, J.

1. The writ petition impugns the Circular dated 27th November,

2008 of the respondent MCD intimating to the petitioner and others

concerned of the petitioner having failed to honour its contractual

obligations under the Work Order dated 8th December, 2006 (for

construction of twelve (12) Class Rooms at M.C. Primary School,

Baljeet Nagar in Karol Bagh Zone), and of the competent authority,

vide order dated 7 th November, 2008 having debarred the petitioner

from the approved panel of MCD for a period of three years.

2. Notice of the writ petition and of the application for interim

relief was issued and counter affidavit filed by the respondent MCD. It

was inter alia the contention of the petitioner that the notice to show

cause leading to the order debarring the petitioner and the order

debarring the petitioner had not been issued by the authority

empowered to issue such a notice and order and the order debarring it

was liable to be set aside on this ground alone. The respondent MCD

filed an additional affidavit on the said aspect along with documents, to

show that the show cause notice as well as the order had been made by

the authorities empowered in that regard. Though opportunity for

filing response thereto was granted to the petitioner on 1 st December,

2009 but no response to said additional affidavit was filed by the

petitioner. This Court vide order dated 19 th January, 2010 dismissed

the application of the petitioner for interim relief. The counsels for the

parties have been heard.

3. The order dated 7th November, 2008 debarring the petitioner and

of which intimation was given vide Circular dated 27 th November,

2008, has not been filed by either of the parties. It is the contention of

the petitioner that the respondent MCD has failed to provide copy of

the said order to the petitioner. The respondent MCD in its counter

affidavit neither specifically dealt with the said plea, nor as aforesaid,

filed copy of the order debarring the petitioner. The respondent MCD

however along with its additional affidavit (though filed on the aspect

of the authority empowered to take action for debarring) has filed as

Annexure-B thereto the photocopy of its noting file which shows that

the authority empowered to so debar has not passed any speaking order

but merely appended its signatures on 7 th November, 2008 to the

proposal submitted before it for (i) forfeiting the earnest money,

(ii)rescinding and recalling the tender at the risk and cost of the

petitioner, (iii) debarring the petitioner for three years and

(iv)imposition of penalty of 10% of the tender amount on the petitioner

for delaying / not executing the work.

4. The counsel for the petitioner has referred to:

(i) Erusian Equipment & Chemicals Ltd. Vs. State of West

Bengal AIR 1975 SC 266 laying down that blacklisting

has the effect of preventing a person from the privilege

and advantage of entering into lawful relationship with the

Government for purposes of gain; the fact that a disability

is created by the order of blacklisting indicates that the

relevant authority is to have an objective satisfaction;

fundamentals of fair play require that the person

concerned should be given an opportunity to represent his

case before he is put on the blacklist.

(ii) M/s. Southern Painters Vs. Fertilizers & Chemicals

Travancore Ltd. AIR 1994 SC 1277 also laying down that

compliance of principles of natural justice i.e. of prior

notice and opportunity of hearing is a must before

blacklisting.

(iii) M/s. V.K. Dewan and Co. Vs. Municipal Corporation of

Delhi 1994 (29) DRJ 522 laying down that in the absence

of a provision to the said effect in the contract, no

blacklisting can be ordered.

(iv) Mekaster Trading Corporation Vs. Union of India

106(2003) DLT 573 laying down that where the order of

blacklisting is passed in a slipshod manner and does not

indicate as to what are the elements which persuaded the

competent authority to reject the contentions of the

blacklisted contractor and where the competent authority

gave no reasons for conclusion that submissions of the

blacklisted contractor were unconvincing; such order

cannot stand judicial scrutiny. It was further held that

though this Court in exercise of power of judicial review

does not sit as an appellate authority over the decision of

the competent authority and is thus not to test the merits of

the decision but the decision making process is to be

examined by the Court. In that case, the order of

blacklisting, after making recital of the events which

transpired after the show cause notice issued, i.e. filing of

replies by the petitioner therein, giving of hearings to both

the parties who explained their respective cases, in the

penultimate para merely recorded that the case had been

examined and heard and the sum and substance of the

allegations made against the petitioner in that case was

that the petitioner could not fulfill its contractual

obligations and the reasons given by the petitioner could

not be found to be convincing; the pleas taken by the

petitioner therein were not dealt with. This Court held the

order of blacklisting to be without reasons and further held

that the requirement that the reasons must meet the

substance of the principal arguments was found to be

lacking.

(v) Vinay Construction Co. Vs. MCD 116 (2005) DLT 14

where also it was held that the requirement of giving show

cause notice and hearing is not an empty formality and

there has to be detailed finding and the authority which

had to decide the question of delisting has to itself give the

hearing and reasons for delisting.

5. In my opinion in the facts of the present case, the principles laid

down in Mekaster Trading Corporation and in Vinay Construction

Co. (supra) apply on all fours. In Mekaster Trading Corporation there

was atleast an order, which was held to be without reasons. In the

present case, there is no order dated 7th November, 2008 of debarring

the petitioner. All that has been produced in the name of the order

dated 7th November, 2008 is the signature of the authority empowered

to debar, approving the action proposed by its subordinate officer. In

fact the subordinate officer also while putting up the proposal for

approval of the competent authority has not given any reason and

merely stated that the proprietor of the petitioner in the personal

hearing had agreed to start work on or before 18 th September, 2008 but

did not start the work "till date". The said proposal is dated 17 th

October, 2008. Only for the reason of the proprietor of the petitioner in

the hearing held having agreed to commence the work on or before 18 th

September, 2008 and having not so commenced the work till 17 th

October, 2008, the action aforesaid was proposed. There is no writing

of the petitioner having so agreed to commence the work. Rather it is

the case of the petitioner that it was to so commence the work subject

to certain conditions which remained uncomplied by the MCD. The

petitioner relies on contemporaneous correspondence in this regard, all

of which was not considered, neither by subordinate officer proposing

action of debarring the petitioner, nor by the authority competent to

debar. In the absence of any order by such authority, it is not known as

to what prevailed with it to approve the action of debarring the

petitioner.

6. The respondent MCD in the present case had given a notice

dated 3rd October, 2007 to the petitioner to show cause as to why

actions contemplated under Clause 3 of the Contract/Work Order i.e. of

rescission of contract, getting work done at the risk and prejudice of the

petitioner and of imposition of penalty (proposal to debar was not

mentioned therein though mentioned in subsequent letter dated 5 th

March, 2008) should not be taken against the petitioner for the reason

of having not even started the work which under the Work Order dated

8th December, 2006 was to be completed within 10 months. Thereafter

vide letter dated 2nd January, 2008 provisional extension of time for

completion of the work without prejudice to the right of the MCD to

claim liquidated damages was granted till 31 st March, 2008. It was the

case of the petitioner that the work could not be commenced since the

site was not clear, there was no vacant space for stacking the material;

a School was already functioning just adjacent to the site and the

construction work posed danger to the School children; there was hard

rock beneath the surface and due to uneven surface the foundation

could not be laid down properly and the design given was not

applicable / suitable to the site. It was further the contention of the

petitioner that none of the said obstructions / impediments to the work

were removed even while granting extension of time. It was further the

case of the petitioner that all the aforesaid facts had been brought to the

notice of the MCD immediately after the award of the work and a letter

recording the same was also issued on 12th January, 2007.

7. The respondent MCD granted further provisional extension of

time for completion of the work upto 30th June, 2008 but the petitioner

continued to complain of the obstructions / impediments aforesaid.

The respondent MCD once again vide notice dated 22 nd May, 2008

asked the petitioner to show cause as to why administrative action

should not be initiated against the petitioner.

8. The petitioner again vide its letter dated 5th June, 2008 pointed

out that the obstructions / impediments aforesaid continued to exist.

9. The respondent MCD vide letter dated 22 nd September, 2008

provisionally extended the time for completion of the work to 31 st

December, 2008 without prejudice to its rights to recover liquidated

damages. The petitioner was thereafter called for personal hearing and

thereafter as aforesaid approval of the competent authority for

debarring the petitioner was obtained.

10. Neither the proposal put up for approval nor the competent

authority while approving the same has discussed or dealt with the

reasons aforesaid given by the petitioner for being not able to

commence the work. The same would show that the action of

debarring suffers from the same malaise as in the case of Mekaster

Trading Corporation and Vinay Construction Co. and cannot stand

for the same reason.

11. Though the petitioner has in the petition also pleaded that the

action has not been taken by the competent authority but on perusal of

the documents produced, I am satisfied that the approval of the action

was obtained from the competent authority, though the competent

authority does not appear to have applied its mind before approving the

same.

12. I may also notice that though the petitioner has also filed a civil

suit with respect to the other actions approved of but during the hearing

it was informed that the proceedings in that suit are kept pending

awaiting the decision in this petition, since the same questions are

involved. The counsel for MCD has contended that the petitioner

having first filed the suit, is not entitled to maintain this writ petition.

However the petitioner has admittedly not challenged the order

debarring it in the suit. The present petition was filed within a month

of the order of debarring. The suit though entailing the same question

as to application of mind by the Competent Authority, relates to fiscal

penalties imposed. I have not found any factual controversy requiring

adjudication, as far as the question of whether any "decision" was

taking or not. The pendency of the said suit is thus not an impediment

to the maintainability or entertainability of this writ petition.

13. The petitioner has also contended that that in the agreement,

there was no provision for debarring and thus the action impugned is

bad for this reason also, as held in V.K. Dewan & Co. (supra).

However in view of the above, need is not felt to deal with the said

argument.

14. The counsel for MCD has contended that the decision of

debarring, being an administrative reason, the only enquiry in judicial

review permissible is to see that the same is not vindictive, harsh or

disproportionate; that in the present case the petitioner has persistently

defaulted / violated the contract; the petitioner having admittedly not

even started the work, is not entitled to any relief.

15. However in the present case, as aforesaid, there is no "decision"

also of the authorities empowered to debar. The obligation to give

show cause notice and hearing entails corresponding duty to give

reasons for not agreeing with the reply to the show cause notice. In the

present case, the respondent MCD has failed to discharge such duty.

So in law, there is no "decision", of which information was given vide

Circular dated 27th November, 2008.

16. The purported order of the respondent MCD debarring the

petitioner thus cannot be sustained and is set aside / quashed. The writ

petition is allowed with costs of `20,000/- payable by the respondent

MCD to the petitioner within four weeks of today.

RAJIV SAHAI ENDLAW (JUDGE) MAY 09, 2011 „gsr‟