Delhi High Court
Hyundai Rotem Company vs Delhi Metro Rail Corporation on 9 January, 2018
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 09.01.2018
+ W.P.(C) 5851/2016
HYUNDAI ROTEM COMPANY ..... Petitioner
Versus
DELHI METRO RAIL CORPORATION ..... Respondent
Advocates who appeared in this case:
For the Petitioner : Mr Kapil Sibal, Senior Advocate, Mr
Sudhir Sachdeva, Senior Advocate with
Mr Arunav Patnaik, Mr Shikhar Saha and
Mr Karun Pahwa.
For the Respondent : Mr A. K. Singla, Senior Advocate with Mr
Tarun Johri, Mr Ankur Gupta and Mr
Puneet Garg.
CORAM
HON'BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. The petitioner has filed the present petition, inter alia, impugning an
order dated 06.07.2016 (hereafter ‗the impugned order') passed by the
Managing Director of the respondent corporation (hereafter ‗DMRC')
blacklisting the petitioner and holding the petitioner to be ineligible for
award of any contract by DMRC either as a firm or as a part of JV firm/JV
SPV in any name and style for a period of five years with effect from
15.07.2015.
2. The aforesaid order has been passed on the basis that the petitioner
had secured the contract (RS-10) with DMRC for supply of Metro Cars on
the basis of a false declaration in its offer and thus, was guilty of a
―fraudulent practice‖. The petitioner had submitted its offer for supply of
Metro Cars pursuant to an invitation to offer issued by DMRC. The
petitioner's offer was the lowest and was accepted by DMRC on
24.05.2013.
3. Thereafter, on 16.06.2015, DMRC issued a show cause notice
alleging that the petitioner had indulged in a fraudulent practice as defined
under clause 4.33.1 of the General Conditions of Contract (GCC) as it had
not disclosed the information at the time of making offer that the Airport
Authority of India (hereafter ‗AAI') had debarred the petitioner from
bidding for its contracts for a period of three years.
4. The petitioner responded to the said show cause notice. However,
the same was not found satisfactory and the Board of Directors of DMRC
passed a resolution on 15.07.2015 blacklisting the petitioner for a period of
five years. Consequently, a communication dated 29.07.2015 was issued
by DMRC in view of the resolution passed by the Board of Directors of
DMRC. The said communication was impugned by the petitioner in a writ
petition filed before this Court (being W.P.(C) 7265/2015). In the said
petition, an order dated 31.07.2015 was passed by this Court directing that
a personal hearing be afforded to the petitioner with a further direction to
DMRC to pass an appropriate order within a period of one week thereafter.
5. In compliance with the aforesaid order dated 31.07.2015, a personal
hearing was afforded to the representatives of the petitioner by two
Directors who, after hearing the petitioner, reiterated the earlier decision
for blacklisting the petitioner for a period of five years with effect from
15.07.2015.
6. Aggrieved by the aforesaid decision, the petitioner preferred another
petition (being W.P.(C) 7656/2015) impugning the communication dated
10.08.2015.
7. Since a Coordinate Bench of this Court did not accede to the
petitioner's request for an urgent interim relief, the petitioner preferred an
appeal before the Division Bench of this Court (being LPA No. 547/2015).
8. The said appeal was disposed of by an order dated 23.11.2015,
whereby the Division Bench of this Court set aside the blacklisting orders
dated 29.07.2015 and 10.08.2015. The Court allowed the petitioner's two
writ petitions - W.P.(C) 7265/2015 and 7656/2015 - principally on the
grounds that the said orders were unreasoned and the authority which had
passed the said orders had not afforded the petitioner any opportunity of
being heard.
9. The Managing Director of DMRC heard the representatives of the
petitioner on 19.01.2016 and thereafter, passed the impugned order.
10. The present writ petition was moved on 08.07.2016. This Court
found no infirmity with the decision of the Managing Director of DMRC in
holding that the petitioner was guilty of a fraudulent practice as defined
under clause 4.33.1 of GCC. The contentions advanced on behalf of the
petitioner to contest the findings of the Managing Director as returned in
the impugned order and the decision making process were rejected;
however, this Court issued a limited notice on the question whether the
punishment of blacklisting the petitioner for a period of five years, was
highly disproportionate.
11. Aggrieved by the aforesaid decision, the petitioner preferred an
appeal before the Division Bench of this Court in LPA No. 397/2016
captioned Hyundai Rotem Company v. Delhi Metro Rail Corporation.
The Division Bench of this Court upheld the decision of this Court
accepting that the allegation of fraudulent practice had been established
and, accordingly, dismissed the appeal by an order dated 21.07.2016.
12. In view of the above, the limited controversy that remains for
consideration of this Court is whether the punishment of debarring the
petitioner for a period of five years is highly disproportionate and thus,
offends Article 14 of the Constitution of India.
13. Mr Kapil Sibal, learned Senior Counsel appearing for the petitioner
contended that non-disclosure of a communication dated 14.12.2011 issued
by the AAI debarring the petitioner from participating in AAI's contract
for a period of three years was not intentional. He reiterated that the
division involved in executing the contract with the AAI was completely
different and, therefore, the management did not, in fact, have any
knowledge of the said order. He fairly conceded that this contention had
not been accepted by this Court as in the order dated 08.07.2016, this Court
had held that the said contention did not inspire any confidence.
14. He submitted that immediately on becoming aware that the AAI had
debarred the petitioner, the petitioner company had instituted an enquiry at
its head office in Seoul and had issued notices to the two employees (Mr
Chug and Mr Lee) who were responsible for dealing with the AAI's bid.
The enquiry revealed that the pre-qualification bid to the AAI pertained to
supplying Passenger Boarding Bridges at Indian Airports. He submitted
that the petitioner's Aerobridge business was carried out by the Plant and
Machinery Division of the petitioner company and was a very small part of
its overall business comprising less than 0.5% of the total revenue of the
petitioner company. He submitted that the enquiry had revealed that the
two officials of the Plant and Machinery Division had not informed the
company about the developments with the AAI. In their defence, the said
employees had contended that they had misunderstood and ignored the
letters received from AAI. This explanation was not found acceptable and
the petitioner had taken the necessary disciplinary action by terminating
the employment of the said two employees (Mr Chung and Mr Lee).
15. He submitted that this clearly established that the petitioner had
taken the necessary internal remedial measures and had not condoned the
action of its employees.
16. Next, Mr Sibal submitted that the petitioner had also initiated a drive
to train its employees in order that such a lapse does not occur in future.
17. Mr Sibal also submitted that the petitioner had successfully bid for
supplying trains for Delhi Metro in the past (RS-1 for 280 cars during the
period 2001 to 2007; RS-3 for 196 cars during the period 2007 to 2011;
RS-9 for 92 cars during the period 2013 to 2015) and had also delivered 50
train cars in performance of the contract in question (RS-10). He submitted
that in addition, the petitioner had supplied 150 train cars for Bangalore
Metro Phase-I and 171 train cars for Hyderabad Metro. He submitted that
this clearly established that the petitioner was not wanting in performance
of the contracts awarded to the petitioner and this factor ought to have been
considered while passing the impugned order.
18. Next, Mr Sibal contended that the petitioner had been deprived of
bidding for over 23 contracts with the aggregate value of several thousand
crores. He handed over a tabular statement of the number of contracts for
which the petitioner could not bid on account of the punitive measure
imposed in terms of the impugned order. He stated that this had already
caused substantial loss to the petitioner and that the punitive measure
imposed was clearly very harsh and disproportionate to the alleged
offending act.
19. Next, Mr Sibal referred to the General Financial Rules, 2017 issued
by the Ministry of Finance, Department of Expenditure and drew the
attention of this Court to Rule 151 of the said Rules, which expressly
provides that a bidder may be debarred if he has been convicted for an
offence under Prevention of Corruption Act, 1988 or the Indian Penal
Code, 1860 for a period not exceeding three years. He submitted that a
bidder could also be debarred from commercial transactions for a period of
two years if it is determined that the bidder had breached the Code of
Integrity.
20. He emphasised that in terms of Rule 175(1) of the said Rules, the
Code of Integrity included serious acts of misconduct and yet maximum
punishment provided was of debarment of two years. He earnestly
contended that the punishment must commensurate with the petitioner's
alleged offence viewed in the context of the General Financial Rules, 2017
and the same warranted that only a token penalty be imposed.
21. Mr Sibal also referred to a letter dated 11.03.2015 issued by the
Japan International Co-operation Agency (hereafter ‗JICA'), whereby the
JICA had suspended the petitioner's eligibility for participation in tenders
for contracts for a period of four months with effect from 11.03.2015 to
10.07.2015. The said letter indicated that the same had been issued on the
basis of the punitive measure initiated by DMRC. He submitted that JICA
was the funding agency for RS-10 Project and it had taken action against
the petitioner in terms of Article 5 of ―JICA Rules on Measures against
Persons Engaged in Fraudulent Practices etc in Projects of ODA Loan and
Grant Aid‖ and Article 4 of ―JICA Rules on Sanctions to Suspend
Eligibility for Participation in Tenders for Contracts‖.
22. Mr Singla, the learned Senior Counsel appearing for DMRC
countered the submissions advanced on behalf of the petitioner. He
submitted that the question whether the petitioner was guilty of fraudulent
practice had been established and the punishment imposed on the petitioner
could by no stretch be considered as unreasonable. He drew the attention of
this Court to the Checklist (―Filter of Applicants - Checklist‖), which
formed a part of the tender documents and submitted that the petitioner
was specifically required to respond whether it had been debarred by
JICA/Government of India/any State Government in India or any Central
or State Government Undertaking. He also referred to the Note-2 at the end
of the Checklist, which clearly stated that if the answer to any of the
specified questions was in the affirmative, the same would disqualify the
applicant. He submitted that the petitioner provided an incorrect answer to
the queries listed in the Checklist, and therefore would have been
disqualified from participating in the bidding for the contract in question.
He contended that in the given circumstances, the petitioner's debarment
for a period of five years could not be considered as harsh or
disproportionate.
Reasoning and Conclusion
23. At the outset, it is necessary to observe that there is no dispute that if
the petitioner had filled in the correct information in the tender documents,
the petitioner would have been disqualified from participating in the bids
for the RS-10 Contract. The relevant extract of the ―Filter of Applicants -
Checklist‖ filled in by the petitioner is set out below:-
S. No. Criteria Yes No
xxxx xxxx xxxx xxxx
6. Has the Applicant being
debarred by JICA/Government
of India/any State Government in
India/Central or State
Government undertaking as on
the due date of submissions of
bid? (Bidder to furnish a specific
undertaking to this effect)
7 xxxx xxxx xxxx
8 Has any misleading information
been given in the application?
Note- 2. A ―YES‖ answer to any question 1,3,4,5,6 or 8
will disqualify the applicant.‖
24. This Court had, in the order dated 08.07.2016 held that the
knowledge of the two employees who had handled the submission of pre-
qualification bids to the AAI would be sufficient to impute knowledge of
the same to the petitioner. The Court further held that it was not believable
that the management would not be aware of the reasons for being
unsuccessful in the bid submitted to the AAI and the circumstances clearly
establish that the petitioner was aware of the debarment order passed by
the AAI.
25. In view of the above, there could be little doubt that the decision of
DMRC to debar the petitioner cannot be faulted. Thus, as observed above,
the only question that falls for consideration is whether the punishment
imposed is disproportionate to the conduct of the petitioner, which has
been found to be fraudulent.
26. It is now well settled that State/State Instrumentalities must act
reasonably and fairly. Fair play, natural justice, non-arbitrariness are now
well recognized facets of Article 14 of the Constitution of India.
Undisputedly, DMRC had the discretion - subject to the discipline of
Article 14 of the Constitution - to decide, who it desires to enter into
contracts with and its decision not to deal with a party who has been found
to have secured a contract by submitting incorrect information, cannot be
questioned. However, DMRC, being a State, is enjoined to act reasonably
and fairly; its decisions must be informed by reason and cannot be
arbitrary. Thus, it is essential that the punitive measure imposed by DMRC
be commensurate with the offending conduct of the petitioner. It is also
well settled that the period of debarment cannot be permanent. In Kulja
Industries Ltd v. Chief General Manager, Western telecom Project BSNL
& Ors: AIR 2014 SC 9, the Supreme Court observed as under:-
―24. Suffice it to say that ‗debarment' is recognised and often
used as an effective method for disciplining deviant
suppliers/contractors who may have committed acts of
omission and commission or frauds including
misrepresentations, falsification of records and other breaches
of the regulations under which such contracts were allotted.
What is notable is that the ‗debarment' is never permanent
and the period of debarment would invariably depend upon
the nature of the offence committed by the erring contractor.‖
27. In Kulja Industries Ltd. (supra), the Supreme Court had also noticed
that the legal position governing blacklisting of suppliers in United States
of America (USA) and United Kingdom (UK), was no different. The Court
also noted that in USA, the Federal Government had issued comprehensive
guidelines, which also stipulated the factors that would influence the
decision of debarment. As regards the period of blacklisting is concerned,
the Supreme Court had observed that for the sake of ―objectivity and
transparency‖, the respondent therein may frame guidelines to be followed
in various cases. The Supreme Court had also summarized certain factors
to be used as a guide by the concerned authority for determining the
question of blacklisting a party. The relevant extract of the said decision is
set out below:-
―The guidelines also stipulate the factors that may
influence the debarring official's decision which include
the following:
(a) The actual or potential harm or impact that results
or may result from the wrongdoing.
(b) The frequency of incidents and/or duration of the
wrongdoing.
(c) Whether there is a pattern or prior history of
wrongdoing.
(d) Whether the contractor has been excluded or
disqualified by an agency of the Federal Government or
has not been allowed to participate in State or local
contracts or assistance agreements on a basis of conduct
similar to one or more of the causes for debarment
specified in this part.
(e) Whether and to what extent did the contractor
plan, initiate or carry out the wrongdoing.
(f) Whether the contractor has accepted responsibility
for the wrongdoing and recognized the seriousness of the
misconduct.
(g) Whether the contractor has paid or agreed to pay
all criminal, civil and administrative liabilities for the
improper activity, including any investigative or
administrative costs incurred by the Government, and has
made or agreed to make full restitution.
(h) Whether the contractor has cooperated fully with
the government agencies during the investigation and any
court or administrative action.
(i) Whether the wrongdoing was pervasive within the
contractor's organization.
(j) The kind of positions held by the individuals
involved in the wrongdoing.
(k) Whether the contractor has taken appropriate
corrective action or remedial measures, such as
establishing ethics training and implementing programs
to prevent recurrence.
(l) Whether the contractor fully investigated the
circumstances surrounding the cause for debarment and,
if so, made the result of the investigation available to the
debarring official.‖
28. Admittedly, DMRC has not set out any guidelines for determining
the period of blacklisting. It is, thus, necessary to refer to the impugned
order to examine the factors that weighed with the MD, DMRC for
determining the period of blacklisting. The relevant extract of the
impugned order is set out below:-
―13 Period of debarment
The contract agreement clause 4.33 1 c inter-alia provides for
declaring the contractor ineligible either indefinitely or for a
stated period of time. I have also gone through the guidelines
laid down by the Hon'ble SC in ―Kulja Industries Ltd. vs.
Chief General Manager, BSNL‖ AIR 2014 SC 9. Though it
is the first case in Delhi Metro but M/s HRC did similar
fraudulent act in case of M/s Airports Authority of India
tender for which they were restrained for issuing tenders for
future works for period of 3 years. I have also gone through
the period of debarment imposed by other govt. organization
and the debarment normally ranges from few months of 10
years.
I am of the opinion that debarment of M/s HRC for award of
contracts by DMRC for a stated period of time may have
impact on their business in India from the period of the
department. However, this may not necessarily have impact
on M/s HRC's business outside India.
On the basis of submissions made by M/s HRC in their tender
(tender RS 10) offer and subsequent including personal
hearing. I am the considered opinion that in the instant case,
M/s HRC became eligible for ward of contract RS 10 due to
false declaration in their tender offer, which as per express
conditions of the tender/contract (clause 4.33 1 c of GCC)
shall be as, fraudulent, practice ―and M/s HRC shall be
declared ineligible for award of contract by DMRC for a
stated period of time
I therefore, decide that M/s HRC shall be ineligible for award
of any contract by DMRC either as an individual firm or any
other JV firm/JV SPV in any name and style for a period of
give (5) years w.e.f. 15th July to 14th July 2020‖.
29. It appears from the above that the period of debarment had been
determined by taking a rough average of the period of debarment as fixed
by other Government organizations. According to DMRC, the period of
debarment in other organizations ranges from a few months to ten years.
However, there is no indication in the impugned order as to which are the
orders issued by the other Government organizations that were considered
by the MD of DMRC. Concededly, none of such orders had been provided
to the petitioner. However, in the counter affidavit, DMRC has filed a
tabulated statement of various orders passed by various organizations
debarring certain contractors. Although, the said tabulated statement does
indicate that in several cases, contractors have been banned for a period of
five years; however, there is no indication as to the gravity of the offence
in those cases. It is also seen that in most of the cases contractors have
been banned for a period much less than five years.
30. According to the petitioner, the decision to debar the petitioner for
five years is disproportionate and even though it cannot be characterized as
irrational on the anvil of the wednesbury test (that is, no sensible person
could possibly take the said decision in the given facts), the same would
warrant interference by this Court.
31. In R. (Daly) v. Secy. of State for the Home Deptt.: (2001) 3 ALL
ER 433 (HL), the House of Lords had held that the criteria of
proportionality was more precise and more sophisticated than the
traditional grounds of judicial review. The Court noted the following
differences between the two criteria:-
―(1) Proportionality may require the reviewing court to
assess the balance which the decision-maker has struck, not
merely whether it is within the range of rational or reasonable
decisions.
(2) Proportionality test may go further than the traditional
grounds of review inasmuch as it may require attention to be
directed to the relative weight accorded to interests and
considerations.
(3) Even the heightened scrutiny test is not necessarily
appropriate to the protection of human rights.‖
32. In State of U.P. v. Sheo Shanker Lal Srivastava & Ors: 2006 SCC
(L&S) 521, the Apex Court referred to the decision of House of Lords in
R. (Daly) (supra) and observed as under:-
―24. While saying so, we are not oblivious of the fact that
the doctrine of unreasonableness is giving way to the
doctrine of proportionality.
25. It is interesting to note that the Wednesbury principles
may not now be held to be applicable in view of the
development in constitutional law in this behalf. See, for
example, Huang v. Secy. of State for the Home
Deptt. 2006 QB 1 wherein referring to R. (Daly) v. Secy.
of State for the Home Deptt. (2001) 2 AC 532 it was held
that in certain cases, the adjudicator may require to
conduct a judicial exercise which is not merely more
intrusive than Wednesbury, but involves a full-blown
merit judgment, which is yet more than R. (Daly) [(2001)
2 AC 532, requires on a judicial review where the court
has to decide a proportionality issue.‖
33. In Chairman, All India Railway Recruitment Board & Anr. v. K.
Shyam Kumar & Ors: (2010) 6 SCC 614, the Supreme Court referred to
various decisions and summarised the law as under:-
"36. Wednesbury applies to a decision which is so
reprehensible in its defiance of logic or of accepted moral
or ethical standards that no sensible person who had
applied his mind to the issue to be decided could have
arrived at it. Proportionality as a legal test is capable of
being more precise and fastidious than a reasonableness
test as well as requiring a more intrusive review of a
decision made by a public authority which requires the
courts to ―assess the balance or equation‖ struck by the
decision-maker. Proportionality test in some jurisdictions
is also described as the ―least injurious means‖ or
―minimal impairment‖ test so as to safeguard the
fundamental rights of citizens and to ensure a fair balance
between individual rights and public interest. Suffice it to
say that there has been an overlapping of all these tests in
its content and structure, it is difficult to
compartmentalise or lay down a straitjacket formula and
to say that Wednesbury has met with its death knell is too
tall a statement. Let us, however, recognise the fact that
the current trend seems to favour proportionality test
but Wednesbury has not met with its judicial burial and a
State burial, with full honours is surely not to happen in
the near future.
37. Proportionality requires the court to judge whether
action taken was really needed as well as whether it was
within the range of courses of action which could
reasonably be followed. Proportionality is more
concerned with the aims and intention of the decision-
maker and whether the decision-maker has achieved
more or less the correct balance or equilibrium. The court
entrusted with the task of judicial review has to examine
whether decision taken by the authority is proportionate
i.e. well balanced and harmonious, to this extent the court
may indulge in a merit review and if the court finds that
the decision is proportionate, it seldom interferes with the
decision taken and if it finds that the decision is
disproportionate i.e. if the court feels that it is not well
balanced or harmonious and does not stand to reason it
may tend to interfere.‖
34. The Supreme Court further observed as under:-
―39. The courts have to develop an indefeasible and
principled approach to proportionality, till that is done
there will always be an overlapping between the
traditional grounds of review and the principle of
proportionality and the cases would continue to be
decided in the same manner whoever principle is
adopted. Proportionality as the word indicates has
reference to variables or comparison, it enables the court
to apply the principle with various degrees of intensity
and offers a potentially deeper inquiry into the reasons,
projected by the decision-maker.‖
35. In view of the principles as laid down above, the order of
blacklisting an entity may be subject to judicial review if it is concluded
that it was not within the range of the action, which ought to have been
reasonably taken. The question whether the period of debarment of five
years was within the reasonable range would necessarily have to be tested
on the basis of a benchmark set by the DMRC. In absence of any such
benchmark, the benchmark set by other organizations ought to serve as
guidelines. In this case, although it is mentioned that the competent
authority had relied on other blacklisting orders passed by other
organizations, the same have neither been referred to nor is it discernable
whether facts in any of the cases were similar to the one in this case.
36. In the impugned order, it has been merely observed that the order of
debarment ranges for a few months to ten years; thus, implying that the
concerned authorities could exercise its discretion to debar the petitioner
for any period within the said range. Plainly, this would suffer from the
vice of arbitrariness. Blacklisting or debarring an entity from participating
in contracts is a serious measure and insofar as possible must be pivoted on
certain objective criteria. Since DMRC has not set out any guidelines
which would serve as a benchmark as to the period of debarment in a
particular situation, the MD had rightly sought to rely on orders passed by
the other government organizations. This Court finds nothing wrong with
the approach of drawing or adopting guidelines as set out by any other
government organization. However, the period of blacklisting must be
correlated to the gravity of the offence and mitigating circumstances, if
any; surrounding the case, merely referring to period of debarment in
various orders de hors the facts in those cases or the guidelines applied
therein may be of a little assistance in obviating the vice of arbitrariness
and would hardly further the purpose of ensuring objectivity in the decision
making process.
37. It is also relevant to mention that the instructions to tenderers
expressly indicated that JICA was funding the procurement and in case
funding by JICA was only in part or nil, the balance would be funded by
other sources. It was expressly provided that JICA required the contractors
as well as Government of India to observe the highest standard of ethics
during the procurement and execution of such contracts. JICA would also
recognize a contractor as ineligible for a period determined by JICA in
case the contractor is found to have engaged in corrupt or fraudulent
practice. The relevant extract of the instructions to bidders is set out
below:-
―In case of JICA funding for the procurement, JICA
requires that bidders and contractors, as well as
Government of India, under contracts funded with JICA
ODA loans and other Japanese ODA, observe the highest
standard of ethics during the procurement and execution
of such contracts. In presence of this policy JICA:
a) will reject a proposal for award if it determines that the
bidder recommended for award has engaged in corrupt or
fraudulent practices in competing for the contract in
question;
b) will recognize a contractor as ineligible, for a period
determined by JICA, to be awarded a contract funded
with JICA ODA Loans if it at any time determines that
the contractor has engaged in corrupt or fraudulent
practices in competing for, or in executing, another
contract funded with JICA ODA Loans or other Japanese
ODA.‖
38. Concededly, JICA has framed Rules for taking measures against
persons engaged in fraudulent practices. Since tender documents had
clearly referred to JICA's requirement for observing the highest standards
of ethics and also indicated that punitive measures would be taken against
the developing contractors, the rules framed by JICA would offer ready
guidelines for determining the action to be taken against all delinquent
bidders. It is relevant to mention that JICA had also taken punitive
measures against the petitioner in terms of Article 5 of ―JICA Rules on
Measures against Persons Engaged in Fraudulent Practices etc in Projects
of ODA Loan and Grant Aid‖ and Article 4 of ―JICA Rules on Sanctions
to Suspend Eligibility for Participation in Tenders for Contracts‖. JICA
had, on the basis of the incorrect statement made by the petitioner in its bid
to DMRC, suspended the petitioner from being considered eligible for
participation in various contracts funded by it for a period of four months.
39. The General Financial Rules, 2017 (hereafter ‗the Rules') published
by the Department of Expenditure, Ministry of Finance, Government of
India also provides for debarment of bidders in case the bidders breach the
Code of Integrity. Rule 151 of the General Rules is set out below:-
"Rule 151 Debarment from bidding.
(i) A bidder shall be debarred if he has been convicted
of an offence--
(a) under the Prevention of Corruption Act, 1988;
or
(b) the Indian Penal Code or any other law for the
time being in
force, for causing any loss of life or property or
causing a threat to public health as part of
execution of a public procurement contract.
(ii) A bidder debarred under sub-section(i) or any
successor of the bidder shall not be eligible to
participate in a procurement process of any
procuring entity for a period not exceeding three
years commencing from the date of debarment.
Department of Commerce (DGS&D) will maintain
such list which will also be displayed on the
website of DGS&D as well as Central Public
Procurement Portal.
(iii) A procuring entity may debar a bidder or any of its
successors, from participating in any procurement
process undertaken by it, for a period not exceeding
two years, if it determines that the bidder has
breached the code of integrity. The
Ministry/Department will maintain such list which
will also be displayed on their website.
(iv) The bidder shall not be debarred unless such
bidder has been given a reasonable opportunity to
represent against such debarment‖
40. Rule 175(1) of the aforesaid Rules, provides for Code of Integrity
and is set out below:-
"Rule 175 (1) Code of Integrity
No official of a procuring entity or a bidder shall
act in contravention of the codes which includes
(i)prohibition of
(a) making offer, solicitation or acceptance of bribe,
reward or gift or any material benefit, either
directly or indirectly, in exchange for an unfair
advantage in the procurement process or to
otherwise influence the procurement process.
(b) any omission , or misrepresentation that may
mislead or attempt to mislead so that financial or
other benefit maybe obtained or an obligation
avoided.
(c) any collusion, bid rigging or anticompetitive
behaviour that may impair the transparency,
fairness and the progress of the procurement
process.
(d) improper use of information provided by the
procuring entity to the bidder with an intent to gain
unfair advantage in the procurement process or for
personal gain.
(e) any financial or business transactions between the
bidder and any official of the procuring entity
related to tender or execution process of contract;
which can affect the decision of the procuring
entity directly or indirectly.
(f) any coercion or any threat to impair or harm,
directly or indirectly, any party or its property to
influence the procurement process.
(g) obstruction of any investigation or auditing of a
procurement process.
(h) making false declaration or providing false
information for participation in a tender processor
to secure a contract;
(ii) disclosure of conflict of interest.
(iii) Disclosure by the bidder of any previous transgressions
made in respect of the provisions of sub-clause(i) with
any entity in any country during the last three years or
of being debarred by any other procuring entity.‖
41. It is seen from the above that in terms of clause (h) of Rule 175(1)(i)
of the Rules, making a false declaration or providing false information to
secure a contract would amount to breach of the Code of Integrity and, in
terms of Rule 151(iii), such breach would invite a punitive measure of
debarment of a bidder for a period not exceeding two years.
42. Plainly, although it is not mandatory for DMRC to follow the above
Rules, DMRC could use the same as a benchmark to determine the
quantum of punishment to be imposed on the petitioner in absence of any
internal guidelines.
43. The Tabular chart provided by the petitioner indicates that there are
as many as 23 contracts for which the petitioner has been unable to bid on
account of the blacklisting order. It is also relevant to note that DMRC has
not cancelled the petitioner's bid although it was entitled to do so.
44. As noted above, the Supreme Court in Kulja Industries Ltd. (supra)
had laid down the factors that ought to be considered by the competent
authority while taking a decision to blacklist an entity. Although, it does
appear that the impact of the wrongdoing in this case is material as the
petitioner was able to secure the contract for which it was disqualified to
bid for; however, there is little material to conclude that the petitioner had
planned to initiate and carry out the wrongdoing. The petitioner had
explained that the Division, which was concerned with the business
aerobridges, was the Plant and Machinery Division of the petitioner and
not the Division that was involved in the RS-10 contract. Concededly, the
petitioner is a very large organization and it is expected that each division
would have considerable amount of autonomy in conducting its business.
Whilst the knowledge of officers involved in bidding for Aerobridges to
AAI is also imputed to the petitioner organization and the petitioner cannot
absolve itself of the liability for making an incorrect statement, there is
little material to conclude that the wrong statement made by the petitioner
while bidding for the RS 10 Contract, was carefully deliberated and
planned.
45. The petitioner has also asserted that it had conducted an inquiry and
had taken disciplinary action against its employees who were found
responsible for the bids submitted to the AAI. This Court does not find
any reason to doubt the same. The petitioner also claims that it has taken
steps to train its officers and had taken remedial steps to ensure that such
incidents do not happen in future. If serious disciplinary action has been
taken against senior officers involved with the bids submitted to the AAI, it
is expected that the message within the petitioner's organization would be
clear.
46. In view of the above, it cannot be disputed that there are certain
mitigating factors that ought to have been taken into account while fixing
the period of debarment.
47. Keeping the Rules and the punitive measures imposed by JICA as
well as the explanations provided by the petitioner, the period of
debarment is plainly disproportionate. During the course of arguments, this
Court had suggested that the period of debarment be reduced to three years.
However, it would be apposite for DMRC to reconsider the period of
blacklisting keeping in view the observations and principles as noticed
above. It is so directed.
48. The petition is disposed of with the aforesaid directions. The parties
are left to bear their own costs.
VIBHU BAKHRU, J
JANUARY 09, 2018
RK
