Delhi High Court
M/S Raj Corporation Ltd. vs National Highway Authority Of ... on 29 October, 2021
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 30.09.2021.
Date of Decision: 29.10.2021.
+ W.P.(C) 3448/2021
M/S RAJ CORPORATION LTD. ..... Petitioner
Through Mr.Amit Sibal, Sr.Adv. with
Mr.Vishal Yadav, Mr.Abhishek Diwedi, Advs.
versus
NATIONAL HIGHWAY AUTHORITY OF INDIA & ANR.
..... Respondent
Through Mr.Saurabh Banerjee, Adv.
CORAM:
HON'BLE MS. JUSTICE REKHA PALLI
REKHA PALLI, J
JUDGMENT
1. The present petition has been preferred under Article 226 of the
Constitution of India seeking setting aside and quashing of Show Cause
Notice dated 22.10.2020 and the consequential order dated 27.11.2020
passed by the respondent no. 1 debarring the petitioner from participating
in any future projects to be floated by the respondent no. 1 for a period of
two years.
2. The petitioner is a construction company providing infrastructure
development services and claims to have successfully undertaken several
construction contracts for various state governments and public sector
undertakings. The respondent no. 1/National Highways Authority of India
(hereinafter, "NHAI"), an authority established under the National
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Signing Date:29.10.2021
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Highways Authority of India Act, 1988, is responsible for the construction
of various highways across India. Even though the General Manager (T) of
respondent no.1 has been arrayed as respondent no.2, no relief is sought
against the said respondent and therefore, reference to the respondent
hereinafter will be read only qua respondent no.1.
3. Upon the respondent issuing a Request For Proposal (hereinafter
referred to as "RFP") inviting bids for the construction of a "Six lane
access controlled Highway (NH-152D) starting from junction with Kaithal-
Safidon road (SH-11) near Rajound to junction with Jind-Safidon road
(SH-14) near Kheri village (Ch. 56+000 to 80+000) (length 24 km)", the
petitioner on 30.07.2019, submitted a bid in the EPC Mode by a Joint
Venture namely Raj Corporation Ltd. - Bhuvaneshwar Construction
Company, of which the petitioner was the lead member. The bid
(hereinafter referred to as "first Bid") was accompanied by certificates of
eligible projects by the Petitioner‟s chartered accountant M/s Ramji Sriram
& Associates. Vide its letter dated 29.08.2019, the respondent sought
certain clarifications from the Joint Venture, to which no reply was
furnished and consequently the bid submitted by the Joint Venture was
declared as non-responsive on account of the Joint Venture having failed to
meet the eligibility criteria as specified under clause 2.2.2.2(i) of the RFP,
consequently, the petitioner was refunded the bid security amount.
4. On 03.07.2020, the petitioner company, this time in its individual
capacity, submitted its bid (hereinafter referred to as, "second bid") for
another tender floated by the respondent. The same was for construction of
a "Six lane access-controlled Highway from Junction with sector - 62/25
diving road on Faridabad-Ballabhgarh bypass to Junction near KMP
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expressway with NH-148N (Delhi-Vadodara Expressway) section of NH-
148NA (Design CH 33+000 to 59+063) in the State of Haryana on Hybrid
Annuity Mode under Bharatmala Pariyojna." Vide its letter dated
17.07.2020, upon finding that some of the supporting documents submitted
by the petitioner were not in accordance with the terms of the RFP, the
respondent, while directing the petitioner to furnish some original
documents as per the terms of the RFP, sought certain clarifications from
the petitioner. One of the aspects on which clarification was sought from
the petitioner was the reason for submission of the „Independent Auditor‟s
Report‟ for the years 2018-19 & 2019-20 instead of the „Tax Audit
Reports‟ for the said years as required under the RFP.
5. In response thereto, the petitioner vide its letter dated 22.07.2020,
while clarifying the issues raised by the respondent, submitted copies of the
independent auditor‟s reports for the relevant years along with the amended
bank guarantee as well as a corrected copy of the letter accompanying the
technical bid.
6. The petitioner‟s bid was, however, once again rejected as being
technically non-responsive, which rejection was based on a difference in
the details and value of the projects claimed to have been undertaken by it
alongwith the year wise break-up of the turnover as submitted by the
petitioner in the two bids, the first dated 30.07.2019 where the petitioner
was part of the Joint Venture and the second being 03.07.2020. The
respondent, vide letter dated 28.07.2020 informed the petitioner that since
it had claimed some additional projects as eligible projects in its first bid
vis-à-vis the projects referred to in the second bid, it was evident that there
was misrepresentation of facts qua the payment received/claimed for
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eligible projects in the bids submitted by it. The petitioner was also granted
an opportunity to make a representation by 05.08.2020. Consequently, the
petitioner vide its letter dated 04.08.2020, while clarifying that the first bid
had been prepared by its erstwhile chartered accountant in the office of its
Joint Venture partner, wherein some mistakes had been committed by him
in preparing details of payments received on a project wise/year wise basis,
also pointed out that all documents submitted alongwith the second bid
were absolutely correct, having been verified from the record. It was,
therefore, claimed by the petitioner that it was fully eligible for award of
the tender on the basis of the total technical score of the highway sector.
7. However, vide its letter dated 06.08.2020, the respondent rejected the
petitioner‟s representation and informed the petitioner that its bid had been
rightly declared as non-responsive on account of misrepresentation of facts
and inflation of financial certificates, to influence the bidding process,
which amounted to fraudulent practice in terms of Clause 4.3(b) of the
RFP. The rejection order was followed by the impugned Show Cause
Notice dated 22.10.2020, whereby the petitioner was asked to show cause
as to why it should, as per terms of the RFP, not be debarred from
participating in the ongoing and future bids of the respondent for a period
of 2 years, on account of it having adopting fraudulent practices. The
petitioner was granted 15 days‟ time to submit its representation and was
also asked to indicate whether it was desirous of availing an opportunity of
personal hearing.
8. As directed, the petitioner submitted its reply on 26.10.2020, wherein
while making a request for a personal hearing in terms of paragraph 6 of
the Show Cause Notice, it sought to explain that the documents submitted
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with its first bid had been prepared in the office of its Joint Venture Partner
where, due to an inadvertent mistake on the part of its Chartered
Accountant Ramji Sriram & Associates, who had vide its letter dated
24.09.2019 already sent a communication disclosing that an error had been
committed on his part, the papers meant to be submitted with the bid had
been mixed up with papers of some other contractors. The petitioner, in its
reply, also reiterated that there was no misrepresentation on its part and all
the documents submitted along with its second bid were in order.
9. The reply furnished by the petitioner was not found to be satisfactory
and consequently, the respondent vide its impugned letter dated 27.11.2020
informed the petitioner that the Competent Authority had not found any
merit in the explanation so proffered. Consequently, the petitioner was
debarred from participating in the ongoing and future bids of the
respondent for a period of two years. Being aggrieved by the impugned
order, the petitioner approached the respondent‟s Chairman vide its
representation dated 03.12.2020, wherein the petitioner while pointing out
that similarly placed bidders, who had committed mistakes of a like nature
were debarred for a period of six months only, prayed for reduction of the
period of debarment. The petitioner also set out that the debarring order
was likely to affect its workforce of 3000 employees during the ongoing
pandemic of COVID-19. As the representation did not elicit any response,
the petitioner sent further reminders on 19.01.2021 and 08.02.2021, but to
no avail and consequently, the present petition came to be filed.
10. In support of the petition, Mr. Amit Sibal, learned senior counsel for
the petitioner, firstly submits that the respondent‟s presumption that the
petitioner had made any misrepresentation or indulged in a fraudulent
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practice was wholly without any basis. The respondent had failed to
appreciate that the first bid was submitted by the petitioner as a member of
a Joint Venture in which there was some mix up of papers on the part of
the Chartered Accountant, M/s. Ramji Sriram & Associates, who had, upon
realising the said mistake, vide its letter dated 24.09.2019, not only
informed the petitioner but also the respondent regarding the inadvertent
mix up in the documents submitted with the first bid that occurred on his
part, as a result whereof, the details of certain unrelated projects were
included in the list of documents submitted with the bid. The petitioner,
upon learning about the said mistake had promptly changed its chartered
accountant by then engaging Shri. Sunil Singhal as its new chartered
accountant, who had prepared the requisite documents submitted with the
second bid. He also submits, that no defects or misrepresentation in
documents submitted with the second bid dated 03.07.2020 were ever
pointed out and that the petitioner was solely disqualified and debarred on
the presumption that the difference in the documents submitted along with
the two bids amounted to misrepresentation and a fraudulent practice.
11. Mr. Sibal then submits that despite the offer made by the respondent
in the impugned Show Cause Notice dated 22.10.2020 to grant an
opportunity of personal hearing to the petitioner, no such opportunity was
ever granted to the petitioner and that too despite a specific request being
made by the petitioner, to avail the same, on 26.10.2020. On the other
hand, the minutes of the meeting of the executive committee of the
respondent held on 11.09.2020 in itself, show that a premeditated decision
to debar the petitioner had already been taken even before issuance of the
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Show Cause Notice to the petitioner. He therefore, contends that the
impugned order is liable to be set aside on this ground alone.
12. Mr. Sibal then submits that the impugned debarring order is not only
wholly cryptic, having been passed without dealing with any of the detailed
submissions made by the petitioner in its representation dated 26.10.2020,
but is even otherwise discriminatory and shows that the respondent is
adopting a pick and choose policy by singling out the petitioner by
debarring it for a period of two years in these difficult times, when the
entire world is reeling under the effects of COVID-19. In support of this
submission, he has drawn my attention to a debarring order dated
18.03.2020 issued by the respondent in respect of one M/s Krishna
Constructions, who had been debarred for a period of six months even after
being found to have indulged in corrupt and fraudulent practices. He
further submits that, in the present case, while debarring the petitioner for
an inordinately long period of two years, the respondent has failed to
appreciate that the petitioner was not guilty of submitting any false or
wrong documents along with its second bid, in respect whereof the
debarring order has been passed, and was being penalised only on account
of a mix up of papers submitted alongwith the first bid, which in any event
was treated as non-responsive.
13. Finally he submits that the impugned order was grossly
disproportionate to the mistake alleged to have been committed by the
petitioner, which lapse, even as per the respondent was committed at the
time of submitting the first bid. He thus, contends that the respondent had
arbitrarily resorted to the extreme and harsh step of debarring the petitioner
for a period of two years without appreciating that the petitioner was not
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even alleged to be guilty of such serious misconduct so as to warrant
blacklisting for the maximum period of two years envisaged under the
RFP. Keeping in view the petitioner‟s past record of carrying out various
construction projects to the utmost satisfaction of the respondent, coupled
with the fact that it was being sought to be penalised on account of a
mistake in respect of the first bid, which bid did not materialize, the
impugned decision to blacklist the petitioner was clearly disproportionate
and unwarranted. In support of his submissions, he places reliance on the
decision of the Apex Court in Kulja Industries Lt. v. Chief General
Manager [(2014) 14 SCC 731] and on a decision taken by a coordinate
bench of this Court in Avinash Em Projects Pvt. Ltd. V. Gail(India)
Limited[2015 SCC Online Del 7135]. He, therefore, prays that the
impugned Show Cause Notice and order be quashed.
14. Per contra, Mr. Saurabh Banerjee, learned counsel for respondent
opposes the petition by contending that the petitioner is a repeat offender
and habitual defaulter, who had been found guilty of time and again
indulging in fraudulent practices. Despite being disqualified in the first
bid, on the ground of submitting details of certain ineligible projects
alongwith its bid and the Tax Audit Reports, instead of the Independent
Auditor‟s Reports as well as an incorrectly drafted bank guarantee along
with a letter that comprised of several inconsistencies and errors with its
technical bid, the petitioner once again committed the same mistakes while
submitting its second bid for which there is no explanation whatsoever.
Moreover, it had also deliberately failed to comply and adhere to the
mandatory conditions of the RFPs for two consecutive years i.e. the first
bid submitted in July, 2019 and the second bid submitted in July, 2020.
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The respondent could therefore, not be faulted for passing the impugned
notice and order.
15. He further submits that the petitioner has also deliberately withheld
the letter dated 29.08.2019 from this Court, wherein it was called upon to
submit replies/clarifications to the discrepancies raised by the evaluation
committee of the respondent no.1, in respect of the bid dated 30.07.2019,
which it failed to furnish, and in fact readily accepted the refund of the bid
security amount. The said letter would clearly show that the petitioner had
been a habitual offender, by repeatedly failing to comply with the
mandatory conditions of the RFP. On both occasions, i.e. while submitting
the first bid as also the second bid, the petitioner had deliberately filed
incomplete documents and defective bank guarantees. Moreover, once the
petitioner company chose not to assail the letter dated 25.09.2019, vide
which its bid dated 30.07.2019 was declared as being technically non-
responsive, it cannot now be permitted to urge that there were no
discrepancies at all in its first bid.
16. Mr. Banerjee submits that the respondent was fully justified in
passing the debarment order once the petitioner was found to be not only
repeatedly violating the mandatory conditions stipulated in the RFP but
also admittedly guilty of having included ineligible projects in the list of
eligible projects furnished with its first bid. The belated explanation now
sought to be given by the petitioner regarding a mix up of papers by the
chartered accountant was rightly rejected. He further submits, that no
interference was called for in the decision to debar the petitioner, with the
same having been taken by the evaluation committee, after a careful
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deliberation of all relevant factors including the explanation sought to be
furnished by the petitioner.
17. Mr. Banerjee then submits that the petitioner‟s plea that the impugned
order is a non-speaking order or that the same was passed by the
respondent without following the principles of natural justice is wholly
incorrect. He submits that the misrepresentation on the petitioner‟s part
was evident from a perusal of the documents filed alongwith the bids itself
and therefore, even though there was no requirement to grant any personal
hearing to the petitioner before passing the impugned order, a personal
hearing was given to the petitioner on 10.11.2020. He thus contends that
the petitioner‟s plea of not having been granted an opportunity of hearing is
merely an afterthought as no such plea was ever taken by it in any of its
representations submitted to the respondent‟s chairman on 03.12.2020,
19.01.2021 and 08.02.2021.
18. He finally submits that the impugned order has been passed to ensure
that stringent and strict standards are maintained by all contractors in
respect of such projects which involve construction and maintenance of
roads for use by the common people. Once it was found that the petitioner
had failed to adhere to the highest standards of ethics as stipulated under
clause 4.1 of the RFP, the respondent was justified in taking action against
the petitioner in accordance with clause 4.2 of the RFP. Seeing the gravity
of the wrongdoings repeatedly committed by the petitioner, the penalty for
debarment for the miniscule period of 2 years could by no means be said to
be disproportionate, harsh or unfair in any manner. He, therefore, prays
that the writ petition be dismissed.
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19. I have heard learned counsel for the parties and with their assistance
perused the records. From the submissions at the bar it appears that, two
primary questions arise for my consideration in the present petition - the
first being, whether the petitioner company can be said to have indulged in
"Misrepresentations" or "Fraudulent Practice" and the second being,
whether the impugned debarring order, to the extent that it debarred the
petitioner from participating in any future tenders of the respondent for a
period of two years, could be said to be disproportionate to the wrongs
allegedly committed by the petitioner.
20. Before dealing with the submissions of the parties on these questions,
it may be apposite to reproduce in extenso the impugned debarring order
dated 27.11.2020 which also refers to the explanation offered by the
petitioner in response to the Show Cause Notice dated 04.08.2020 as also
to the Show Cause Notice dated 22.10.2020. The same reads as under:-
(Kind Attn.-Sh. Manoj Kumar, Engineer)
Sub: Construction of Six Lane access controlled Highway from
Junction with Sector-62/65 dividing road on Faridabad-
Ballabhgarh Bypass to Junction near KMP Expressway with
NH-148N (Delhi-Vadodara Expressway) Section of NH-148NA
(Design Ch. 33+000 to 59 063) in state of Haryana on Hybrid
Annuity Mode under Bharatmala Pariyojana-reg.
Dear Sir/Ma'am,
1.Bids for the subject project were received online in single
stage two cover system(Technical Bid & Financial Bid) on
03.07.2020 wherein you- M/s Raj Corporation Ltd also
submitted the bid.
2. The bid submitted by you was technically evaluated by the
Competent Authority. It was conveyed to you vide letter of even
no. dated 28.07.2020 that your bid was rejected under clause
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2.6.2 of the RFP and declared as "technically non-
responsive" on account of following reasons:
(i)You had earlier submitted your bid in another project of
NHAI with tender id 2019 NHAI_26535_1 for "Construction
of six lane access controlled Highway (NH 152D) starting
from Junction with Kaithal-Safidon road (SH-11) near
Rajound to Junction with Jind-Safidon road (SH-14) near
Kheri village (Ch. 56+000 to 80+000) (length 24 km) under
Bharatmala Pariyojana in the State of Haryana on EPC mode"
on 30.07.2019. The bid for this project was declared as
Technically Non Responsive in the aforesaid project.
(ii) The details of the payments received year wise for eligible
projects claimed in the aforesaid bid in 2019 was compared to
the details submitted in the instant bid of 2020for subject
project. After scrutiny by the Competent Authority, it was duly
observed that you have misrepresented for the payments
received/claimed in the Statutory Auditor's certificates for the
instant bid of 03.07.2020 when compared to the earlier
submitted bid on 30.07.2019 and then attached Statutory
Auditor's certificates.
(iii) You had earlier claimed some additional projects as
eligible projects in the bid for Construction of six lane access
controlled Highway (NH-152D) starting from Junction with
Korthal-Safidon road (SH-11) near Rajound to Junction with
Lind-Safidon road (SH. 14) near Kheri village (Ch 56-000 to
80+000) (length 24 km) under Bharatmala Pariyojna in the
State of Haryana an EPC mode It was observed that sum of
payment claimed in earlier bid, are more than the total sum of
proceeds from contract & supply as per Financial statements
submitted for FY 2018-19, 2017-18 & 2016-17.
(iv) Relying on the above stated facts revealed through the
Statutory Auditor's Certificate submitted by yourself, it was
noted by the Competent Authority that you have
misrepresented the facts of payment received/claimed for
eligible projects. Accordingly, with the approval of Competent
Authority at NHAI, your bid was rejected under clause 2.6.2 of
the RFP and declared as technically non-responsive. You were
given seven days' time period to represent and explain your
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stand, if any, to your technically non responsiveness in
accordance with the principles of Natural justice.
3. Subsequently you had submitted your representation vide
letterno.RCL/NHAI/Faridabad-Ballabhgarh.02 dated
04.08.2020 wherein following was mentioned:
It is being clarified that I was submitted the Bid for
"Construction of six lane access controlled Highway (NH-
1520) starting from junction with Kaithal-Safidon road (SH-
11) near Rajound to Junction with Jind-Safidon Road (Sh-14)
near Kheri village (Ch 56+000 to 80+000) (length 24 Km)
Last year in Joint Venture and paper of this tender was
prepared in office of JV Member Some mistakes of accounting
section of other member has been occurred in making detail of
payment received project wise/ year wise. However this tender
has been disqualified, We also apologize for our mistake due
to We and our JV Partner was fresher in tendering of EPC
Mode. We have scrutinized payment received project wise/year
wise at present and submitted this bid accordingly. Now we
are eligible for this tender by total technical score of Highway
Sector only. You are therefore requested to consider my
candidature ship for this tender.
4. Your representation was examined by the Competent
Authority and vide letter of even no dated 06.08 2020, the
following was conveyed to you
(i) Ramji Sriram & Associates, Chartered Accountants was the
statutory auditor for the earlier submitted bid on 20.07 2019
for the project for "Construction of six lane access controlled
Highway (NH-152D) starting from Junction with Kaithal-
Safidon rood (SH-11) near Rajound to Junction with Jind-
Safidon road (SH-14) near Kheri village (Ch. 56+000 to 80
000) (length 24 km) under Bharatmala Pariyojana in the State
of Haryana on EPC mode as well as for the FY 2015-16 to
2018-19 as per the instant bid, All the technical and financial
certificates along with Balance sheet for the aforementioned
bid submitted on 30.07 2019 were signed/audited by Ramji
Sriram & Associates, Chartered Accountants and as such,
your contention that tender documents for the previous
project was prepared in office of JV Member is disproved and
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rendered incorrect.
(ii) Even after considering the claim for the certificates
submitted in the instant bid for payments received/claimed as
correct, the sum of the payment received as per statutory
auditor certificates (financial year wise) of projects claimed
in instant bid and additional projects claimed in earlier bid
dated 30.07.2019, is more than total of the proceeds from
contract & supply as per Financial statements submitted for
FY 2018-19, 2017-18 & 2016-17.
(iii) Based on the above observations revealing
misrepresentation on your part, your representation submitted
vide letter dated 04.08 2020 was found to be absolutely
untenable and was thus rejected Your bid was declared as
technically non-responsive bid on account of
misrepresentation of facts and inflation of the financial
certificates to influence the bidding process amounting to
fraudulent practice in terms of Clause 4.3 (b) of RFP.
5. Vide NHAI letter of even no, dated 22.10.2020, a show-
cause notice was served upon you to submit your explanation
in written or in person, as to why your firm l.e. M/s Raj
Corporation Ltd. should not be debarred from participating
in the ongoing and future bids of NHAI for a period of two
(02) years on account of fraudulent practice as per terms of
the RFP. The notice required you to indicate to the Authority
in writing if you want to avail the opportunity of personal
hearing to explain your position in respect of the above stated
charges within next 15 days of the receipt of the notice.
6. In response to the above show-cause notice, you had
submitted your clarifications vide letter no.
RCUNHAI/Faridabad-Ballabhgarh/03 dated 26.10.2020
wherein the following was submitted:
(i) It is being clarified that we have submitted bid for the work
"Construction of six lane access controlled Highway (NH-
152D) starting from Junction with Kaithal-Safidon road(SH-
11) near Rajound to Junction with Jind-Safidon road (SH-14)
near Kheri village(Ch. 56+000 to 80+000) (length 24km)
dated 30.07.2019 in JV Our candidature ship of the above
work was declared unresponsive as per RFP clause No. 2 2.2.4
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(i) (copy of letter enclosed). As per this letter the eligible
projects submitted for this Bid are not considered for the
qualification criteria.
(ii) As we already intimated that certificates and other
papers of the above bid documents was prepared in JV office
by officials of same CA. At that time of preparation of
certificates and other papers some certificates are erroneously
issued due to mixing of papers of other contractors by officials
of CA We have also clarified it vide letter no
RCL/NHAI/Faridabad-Ballabhgarh/02 dated 04.08 2020 A
letter of CA Ramji Sriram and Associates is also being
enclosed writing by him an 24 Sep 2019 in this regard which
was received by us after 25 Sep 2019 but we have got
disqualified by NHAI on 25 Sep 2019 Therefore we have not
write anything to yourself because my candidateship has been
turned down under Para 2.2.2.2.(i) vide your letter no
NHAV/EM/Ismailabad-Narnaul/2018/Pkg, 3/141586 dated
25.9.2019.
(iii) As we have already intimated that there is nothing
misrepresentation in papers submitted for this bid Le.
"Construction of Six Lane access controlled Highway from
Junction with Sector-62/65 dividing road on Faridabad-
Ballabhgarh Bypass to Junction near KMP Expressway with
NH-148N (Delhi-Vadodara Expressway) Section of NH 148N
(Design Ch 33+000 to 59+063) in state of Haryana on Hybrid
Annuity under Bharatmala Pariyojana" and submitted
certificates are correct. Therefore misrepresentation cannot be
assumed on the basis of last Bid which has been already
disqualified under Clause 22.21 and in this regard we have
also clarified para 1 and 2 as above. Therefore
misrepresentation is not made by us and it will not be justice to
access the Misrepresentation on the basis of certificate of last
bid which already declared non responsive and
cancelled/withdrawn. Therefore, the blame of/show cause
notice for misrepresentation are not correct and not accepted
at all. However we are not claiming candidature ship for this
tender because tender is already disposed off"
7. Vide aforesaid letter dated 26.10.2020, you had also sought
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the chance and time for personal hearing which was granted
on 10.11.2020.
8. Response submitted by you vide letter dated 26 10 2020 has
been examined thoroughly by the Competent Authority and it
was observed that documentary evidence have been submitted
for substantiating your claim that there is no miss-
representation of facts and the certificate submitted in the
earlier bid for Pkg 3 of Ismailabad-Narnaul NH-152D was
erroneously prepared due to mixing up of the paper and the
documents now submitted are correct. Moreover, even in the
personal hearing on 10.11.2020, no such documentary
evidence was submitted or presented. In the absence of any
documentary or any other evidence to support your
assertion/claim, it would be naive for the Authority to believe
just your oral testimony. Moreover, a claim becomes fact and
legally plausible only when there is evidence supporting the
same. For the said reasons, the explanations submitted by you
set out in Para No 6 (i) (ii) and (ii) are not sustainable and
liable to be rejected.
9. In view of above stated reasons, reply submitted by you has
been considered by the Competent Authority and the same is
found to be untenable and is hereby rejected.
10. It is important to state here that if such a behaviour of
adopting fraudulent practices in bidding is not discouraged
and not dealt with strictly, then it would set a wrong precedent
for the future bidders, which in turn, will adversely impact the
public interest involved in the infrastructure projects taken up
by NHAI.
11 Accordingly, in terms of the provisions of RFP and as
approved by the Competent Authority, you are hereby
debarred from participating in on-going bids and future bids
of the NHAI for a period of 2 years.
12. This is without prejudice to other rights available to the
Authority under the provisions of the RFP and other
applicable laws."
Signature Not Verified
DigitallySigned
By:GARIMA MADAN
Signing Date:29.10.2021
19:10:04
21. From a bare perusal of the impugned order, it is evident that the
allegation of misrepresentation against the petitioner was based solely on
the premise that the documents submitted alongwith its first bid, were not
matching with the documents submitted with its second bid. Based on this
difference, the respondent has concluded that the petitioner had sought to
misrepresent facts and indulged in a fraudulent practice, without even
specifying as to what was the fraud in which the petitioner had indulged.
22. The petitioner‟s case is that the error in the documents submitted by it
alongwith the first bid occurred entirely at the hands of M/s Ramji Sriram
& Associates Chartered Accountants, who served as its statutory auditor
while submitting the documents of the first bid on the part of the Joint
Venture. In support of this plea, the petitioner has relied on a letter, sent
from the office of M/s Ramji Sriram & Associates to the petitioner, a copy
whereof was endorsed to the respondent, to contend that the petitioner was
not at all responsible for the error which was being referred to as
"Misrepresentation" by the respondent. The petitioner has further
contended that it already stood penalised by the rejection of its first bid as
non-responsive, despite the letter sent by its erstwhile chartered accountant,
clearly showing that the inadvertent mistake was committed by M/s Ramji
Sriram & Accountants, itself and not on the part of the petitioner company.
The respondent has simply ignored this plea of the petitioner by observing
that there was no documentary evidence filed in support thereof. On the
other hand, the respondent has claimed that as the letter sent by M/s Ramji
Sriram & Accountants, was produced by the petitioner at a later date, its
authenticity was doubtful. In my view, once the petitioner had produced a
letter received from a chartered accountant duly registered with the
Signature Not Verified
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By:GARIMA MADAN
Signing Date:29.10.2021
19:10:04
Institute of Chartered Accountants of India, the least which was expected
from the respondent was to verify the authenticity thereof, before simply
discarding it. Instead of making an attempt to verify the said letter, the
respondent had simply proceeded to hold that the petitioner company had
not produced any documentary evidence in support of its plea that the
documents filed along with its first bid in 2019 inadvertently included data
regarding some of the projects carried out by its Joint Venture partner on
account of a mistake committed by its Chartered Accountant.
23. In my considered opinion, merely because the petitioner failed to
pursue its claim regarding the rejection of its first bid, even after it received
a communication from the petitioner‟s erstwhile chartered accountant,
cannot be the sole ground for doubting the veracity of the said letter. The
petitioner has sought to explain that by the time it received the letter from
its Chartered Accountant, the first tender already stood finalized and
therefore it did not pursue the matter with the respondent regarding its
claim in the first tender, which explanation is certainly a plausible one. I
also find that the respondent has simply compared the documents filed by
the petitioner along with its first bid vis-à-vis the documents filed along
with the second bid and has come to a conclusion that there was
misrepresentation on the petitioner‟s part as the figures submitted
alongwith the two bids were not matching. However, the respondent has
not properly appreciated fact that the first bid was submitted on behalf of a
Joint Venture, of which the petitioner company was a part, while the
second bid was submitted by the petitioner company in its individual
capacity. In fact it appears that the respondent has, while rejecting the
petitioner‟s second bid laid undue emphasis on the documents submitted
Signature Not Verified
DigitallySigned
By:GARIMA MADAN
Signing Date:29.10.2021
19:10:04
alongwith its first bid even though it is an undisputed position that the first
bid was not of the petitioner alone and therefore the erroneous inclusion of
certain projects on the part of its Joint Venture partner or the chartered
accountant, as claimed by both the petitioner and the chartered accountant
could not be ruled out.
24. At this stage, it may be useful to refer to the respondent‟s letter dated
29.08.2019 which required the petitioner to file a response to each of the
discrepancies noticed by the respondent in the petitioner‟s first bid. The
same reads as under:-
Construction of Six-Lane access controlled highway (NH-152D)
starting from Junction with Kaithal-Safidon road(SH-11) near
Rajound to Junction with Jind-Safidon road (SH-14) near
Kheri Village [Ch.56+000 to 80+000; length 24 km] on EPC
Mode under Bharatmala Pariyojana in the State of Haryana-
Clarification from M/s RCL-BCC (JV)
S.No. Discrepancy observed Comments of Evaluation
Committee
1. Appendix-IA (Letter Bidder is to clarify the same.
comprising the Technical Bid)
The Power of Attorney for
signing of Bid, Power of
Attorney for Lead Member
and the Joint Bidding
Agreement have been executed
on 19.07.2019, however,
Appendix-IA (Letter
comprising the Technical Bid
has been signed on 18.07.2019
i.e. before the execution of
POA, JBA etc., It is pertinent
Signature Not Verified
DigitallySigned
By:GARIMA MADAN
Signing Date:29.10.2021
19:10:04
to note that how, the
Authorised Signatory of the
Bidder can sign Appendix-IA
on behalf of the Lead Member
before deriving requisite
powers through POA.
Therefore, Bidder is required
to clarify how the Authorized
Signatory of the Bidder has
signed Appendix-IA (Letter
comprising the Technical Bid)
on 18.07.2019 i.e. before
deriving the requisite powers
through POA executed and
notarized on 19.07.2019.
2. Appendix-IB (Letter Bidder is to clarify the same.
comprising the Technical Bid)
The Power of Attorney for
signing of Bid, Power of
Attorney for Lead Member
and the Joint Bidding
Agreement have been executed
on 19.07.2019, however,
Appendix-IB (Letter
comprising the Technical Bid
has been signed on 18.07.2019
i.e. before the execution of
POA, JBA etc., It is pertinent
to note that how, the
Authorised Signatory of the
Bidder can sign Appendix-IA
on behalf of the Lead Member
before deriving requisite
powers through POA.
Therefore, Bidder is required
to clarify how the Authorized
Signatory of the Bidder has
signed Appendix-IB (Letter
Signature Not Verified
DigitallySigned
By:GARIMA MADAN
Signing Date:29.10.2021
19:10:04
comprising the Technical Bid)
on 18.07.2019 i.e. before
deriving the requisite powers
through POA executed and
notarized on 19.07.2019.
3. Appendix-II (Bank Guarantee The Bidder is to submit the
for Bid Security) amendment to Bank
In para 4 of the Bank Guarantee with correct
Guarantee, the bidder has clauses.
mentioned that the Bank
Guarantee shall be operatable
at a branch in Agra, however,
the same shall be operatable
at a branch in New Delhi.
Therefore, Bidder is required
to furnish an amendment to
the said Bank Guarantee duly
mentioning the address of
Delhi Branch at which the
said Bank Guarantee shall
also be operatable.
Further, at the last of the non-
obstante clause after para 15,
the Bidder has mentioned "All
claims under this guarantee
shall be payable at HDFC
Bank Ltd., Plot no:109, 110,
1st floor Bhawan Plaza,
Sector-12A, Din Dayal
Upadhyay Puram, Sikandra
Agra 282007.", which is in
contradiction to Para 14 of the
format of Bank Guarantee for
Bid Security prescribed in the
RFP.
Therefore, Bidder is required
to furnish the amendment to
the Bank Guarantee duly
Signature Not Verified
DigitallySigned
By:GARIMA MADAN
Signing Date:29.10.2021
19:10:04
rectifying the aforementioned
discrepancy.
4. Audited Annual Reports Bidder is to clarify the same.
1. In case of Lead Member of
the Bidder namely Raj
Corporation Limited, the
Bidder not submitted the
Audited Annual Reports for
Financial Year 2014-15,
which is required as per
clause 2.2.2.8 of RFP. Please
clarify.
2. For FY 2015-16 to FY
2017-18, the Lead Member of
the Bidder namely Raj
Corporation limited has not
submitted the Independent
Auditor's Report, rather the
Bidder has furnished a Tax
Audit Report u/s 44AB of
Income Tax Act, 1961. Please
clarify.
3. For FY 2014-15 to 2018-19,
Other Member of the Bidder
namely Bhuvneshwar
Construction Company has
not submitted the Independent
Auditor's Report, rather the
Bidder has furnished a Tax
Audit Report u/s 44AB of
Income Tax Act, 1961. Please
clarify.
5. Annex-III (Financial Capacity Bidder to clarify whether
of the bidder) Praveen K Srivastava & Co.
In case of other Member of the Or Ramji Sriram & Associate
JV namely "Bhuvneshwar is the Statutory Auditor for
Construction Company, the the other Member of the JV
latest financial statements namely "Bhuvneshwar
Signature Not Verified
DigitallySigned
By:GARIMA MADAN
Signing Date:29.10.2021
19:10:04
have been audited by Praveen Construction Company along
K Srivastava & Co., however, with supporting documents.
the certificate certifying the
Net Worth has been issued by
Ramji Sriram & Associates.
Therefore, Bidder is required
to clarify how Ramji Sriram &
Associate can issue the said
certificate in the capacity of
Statutory Auditor through
some supporting documents.
6. Annex-IV(Details of Eligible Bidder to clarify whether
Projects) Praveen K Srivastava & Co.
In case of other Member of the Or Ramji Sriram & Associate
JV namely "Bhuvneshwar is the Statutory Auditor for
Construction Company, the the other Member of the JV
latest financial statements namely "Bhuvneshwar
have been audited by Praveen Construction Company along
K Srivastava & Co., however, with supporting documents.
the certificate certifying the
Net Worth has been issued by
Ramji Sriram & Associates.
Therefore, Bidder is required
to clarify how Ramji Sriram &
Associate can issue the said
certificate in the capacity of
Statutory Auditor through
some supporting documents.
7. Annex-VI(Information Bidder to clarify whether
required to evaluate the Bid Praveen K Srivastava & Co.
Capacity) Or Ramji Sriram & Associate
In case of other Member of the is the Statutory Auditor for
JV namely "Bhuvneshwar the other Member of the JV
Construction Company, the namely "Bhuvneshwar
latest financial statements Construction Company along
have been audited by Praveen with supporting documents.
K Srivastava & Co., however,
the certificate certifying the
Signature Not Verified
DigitallySigned
By:GARIMA MADAN
Signing Date:29.10.2021
19:10:04
value of A & B under Assessed
Available Bid Capacity has
been issued by Ramji Sriram
& Associates.
Therefore, Bidder is required
to clarify how Ramji Sriram &
Associate can issue the said
certificate in the capacity of
Statutory Auditor through
some supporting documents.
This letter on which heavy reliance has been placed by the respondent to
contend that the petitioner had deliberately suppressed the same from this
Court, in fact does not in any manner forward the case of the respondent. On
the other hand, this letter appears to be supporting the petitioner‟s case that
except for the erroneous inclusion of certain ineligible projects in the list
annexed to the first bid, the discrepancies pointed out by the respondent
were mostly trivial. The petitioner has also explained that no response to this
letter of the respondent was deemed necessary as the petitioner had realized
about the mistake committed by its Chartered Accountant and consequently
it did not raise any grievance regarding the first bid being declared
technically non-responsive.
25. Though the respondent is correct in urging that most of the
discrepancies qua the first bid as mentioned in the letter dated 29.08.2019,
were repeated at the time of raising discrepancies in the second bid as well,
the vital fact which cannot be ignored is that all these discrepancies qua the
second bid were promptly resolved by the petitioner. The respondent‟s own
stand in its letter dated 17.07.2020 requiring the petitioner to submit certain
original documents and make minor corrections in the bank guarantee and
Signature Not Verified
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By:GARIMA MADAN
Signing Date:29.10.2021
19:10:04
the letter accompanying the bid also appears to negate the respondent‟s plea
that there was misrepresentation on the part of the petitioner. In fact, the
petitioner‟s response on 22.07.2020 to the aforesaid communication clearly
shows that the petitioner had duly submitted the necessary original
documents and carried out the corrections as required by the respondent.
The said letter reads as under:-
RAJ CORPORATION LIMITED.
Ref No.: RCL/NHAI/Faridabad-Ballabhgarh/01 Dated: 22.07.2020
To,
Shri Rohin Kumar Gupta,
General Manager (T).
Bharatmala,
NHAI,
G-5 & 6, Sector-10, Dwarka,
New Delhi-110075.
Sub: Construction of Six Lane access controlled Highway from Junction
with Sector-62/65 dividing road on Faridabad -Ballabhgarh Bypass to
Junction near KMP Expressway with NH-148N (Delhi-Vadodara
Expressway) Section of NH-143NA (Design Ch. 33+000 to 59+063) in
state of Haryana on Hybrid Annuity Mode under Bharatmala
Pariyojana.
Ref. Your Letter No.: NHAI/BM/DND-KMP/NH-148NA/ Pkg-3 dated
17.07.2020 sent vide e-mail dated: 17.07.2020
Sir,
With reference to your letter no.- NHAI/BM/DND-KMP/NH-
148NA/ Pkg-3 dated 17.07.2020 regarding clarification on the issues
raised as mentioned in Annexures for the purpose of evaluating the
Signature Not Verified
DigitallySigned
By:GARIMA MADAN
Signing Date:29.10.2021
19:10:04
bid. We are submitting our clarification in tabular form as under:
S. Discrepancy Observed Comments of Our Reply
No. Evaluation
Committee
1. Financial Statements It is requested Both Balance Sheet
to submit the along with Directors
The bidder has Independent Report and
submitted Audited Auditor's Independent Auditor's
Financial Statements report for the report with annexures
for last five financial FY 2018-19 for the FY 2018-19 and
years ie, 2019-20 to and 2019-20. FY 2019-20 are being
2015-16. However, for submitted.
the FY 2019 20 and
2018-19 bidder has
submitted Tax Audit
report in place of
Independent Auditor's
Report.
2. Appendix-II [Bank It is requested Amendment of Bank
Guarantee for Bid to submit Guarantee as required
security) amendment to is being submitted.
the BG.
Bidder has submitted
Appendix-II (Bank
Guarantee for Bid
security) wherein-
(1) In Para 1, bidder
has mentioned RFP date
"22.06.2020" in place of
"16.12.2019"
Signature Not Verified
DigitallySigned
By:GARIMA MADAN
Signing Date:29.10.2021
19:10:04
(2) In Para 3 of
notwithstanding of
amendment of Bank
Guarantee dated
01.07.2020 bidder has
mentioned ".......written
claim or demand,
lodged at our bank
counter........' which
should be deleted from
the Bank Guarantee.
3. Appendix 1A (Letter It is requested Letter of Technical Bid
comprising the to rectify the after necessary
Technical Bid) same. correction are being
enclosed.
The Bidder has
submitted Appendix-1A
(Letter comprising the
Technical Bid) wherein
the last sentence "In
witness thereof, 1/we
submit this Bid under
and in accordance with
the terms of the RFP
document" is not
mentioned by the
Bidder.
Thanking You,
Encl: As above
S/d
Authorized Signatory
From this letter it is apparent, that the deficiencies pointed out by the
respondent were not only majorly technical in nature but were even
Signature Not Verified
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By:GARIMA MADAN
Signing Date:29.10.2021
19:10:04
otherwise duly rectified by the petitioner immediately. I am therefore,
unable to agree with the respondent that the petitioner was a willful or
habitual offender of indulging in any fraudulent practice. It is thus evident
that while passing the impugned order, the respondent, despite being aware
that there were no serious lapses on the part of the petitioner in complying
with the mandatory conditions of the RFP, was swayed only by the factum
of the erroneous inclusion of certain projects in the list submitted by the
Joint Venture alongwith the first bid. It is not the respondent‟s case that the
petitioner failed to promptly respond to the discrepancies pointed out by the
respondent in its letter dated 17.07.2020. The respondent also does not
allege that there was any wrongful inclusion of any project in the supporting
documents filed alongwith the petitioner‟s second bid.
26. Having said so, the fact that there was a discrepancy between the
documents filed by the petitioner along with its second bid vis-à-vis the
documents filed along with the first bid cannot be denied. The petitioner
had admitted that the documents filed alongwith the first bid wrongly
included details of certain projects which were not relevant, which bid had
in any event been rejected as being technically non-responsive. Once the
said lapse was admittedly not repeated in the second bid, merely because
there were certain deficiencies in the second bid also, which were promptly
removed by the petitioner, it could not be said that any fraudulent practices
were being adopted by it while submitting its second bid. I am therefore,
unable to agree with the respondent that the petitioner was guilty of any
misrepresentation or fraudulent practices.
27. At this stage, I may also note the petitioner‟s plea that the decision to
debar it was taken much before the petitioner was even called upon to show
Signature Not Verified
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By:GARIMA MADAN
Signing Date:29.10.2021
19:10:04
cause and was therefore pre-meditated. A perusal of the minutes of the
meeting of the Executive Committee of the respondent held on 11.09.2020
leaves no manner of doubt that the respondent had in its said meeting
already decided to debar the petitioner. The Show Cause Notice was issued
to the petitioner on a subsequent date on 22.10.2020, was therefore evidently
an empty formality and did not leave any scope for the petitioner to oppose
the debarring itself.
28. The impugned debarring decision was not only based on a conclusion
already arrived at by the executive committee on 11.09.2020 but in fact,
even the letters dated 28.07.2020 and 06.08.2020 addressed to the petitioner
suggest that the respondent had already arrived at a final conclusion that the
discrepancies noticed in the two bids were willful in nature. The impugned
debarring order thus appears to have been passed on the basis of a
preconceived notion regarding the petitioner‟s guilt, rather than a holistic
decision, taken after providing due consideration to all the replies and
representations made by the petitioner. I therefore, have no hesitation in
holding that the conclusion of the petitioner being guilty of
misrepresentation and indulging in fraudulent practice was arrived at
without due application of mind to all the relevant factors and thus cannot be
sustained.
29. However, be that as it may, the undisputed position emerging from
the record regarding the discrepancy in the documents submitted by the
petitioner Vis-a-vis its two bids cannot be simply overlooked. The petitioner
has sought to justify the mistake in submission of some incorrect documents
along with the first bid by blaming its Chartered Accountant, who is stated
to have admitted this mistake. The fact however remains that the documents
Signature Not Verified
DigitallySigned
By:GARIMA MADAN
Signing Date:29.10.2021
19:10:04
filed along with the two bids were not matching and therefore, while the
respondent cannot be said to be wholly unjustified in choosing to restrict its
dealings with the petitioner company, the petitioner‟s plea regarding the
disproportionality of the penalty imposed by the impugned order needs to be
now dealt with.
30. In this regard, the petitioner has relied on the decision of the Apex
Court in Kulja Industries limited Vs. Chief Gen. Manager (2014) 14 SCC
731, to contend that any decision made by the respondent in furtherance of
its freedom to contract or not to contract with a private entity is subject to
judicial review by a writ Court. A decision of debarring has therefore to
necessarily withstand the touchstone of fairness, relevance, natural justice,
non-discrimination, equality and proportionality. The observations of the
Apex Court in paragraphs 21 and 22 of Kulja (Supra) may be usefully
extracted herein below:-
"21. The legal position governing blacklisting of suppliers in USA
and UK is no different. In USA instead of using the expression
"blacklisting" the term "debarring" is used by the Statutes and
the Courts. The Federal Government considers "suspension and
debarment" as a powerful tool for protecting taxpayer resources
and maintaining integrity of the processes for federal acquisitions.
Comprehensive guidelines are, therefore, issued by the
government for protecting public interest from those contractors
and recipients who are non-responsible, lack business integrity or
engage in dishonest or illegal conduct or are otherwise unable to
perform satisfactorily. These guidelines prescribe the following
among other grounds for debarment:
(a) Conviction of or civil judgment for --
(1) Commission of fraud or a criminal offense in connection with
obtaining, attempting to obtain, or performing a public or private
agreement or transaction;
Signature Not Verified
DigitallySigned
By:GARIMA MADAN
Signing Date:29.10.2021
19:10:04
(2) Violation of Federal or State antitrust statutes, including those
proscribing price fixing between competitors, allocation of
customers between competitors, and bid rigging;
(3) Commission of embezzlement, theft, forgery, bribery,
falsification or destruction of records, making false statements,
tax evasion, receiving stolen property, making false claims, or
obstruction of justice; or
(4) Commission of any other offense indicating a lack of business
integrity or business honesty that seriously and directly affects
your present responsibility;
(b) Violation of the terms of a public agreement or transaction so
serious as to affect the integrity of an agency program, such as--
(1) A willful failure to perform in accordance with the terms of
one or more public agreements or transactions;
(2) A history of failure to perform or of unsatisfactory
performance of one or more public agreements or transactions; or
(3) A willful violation of a statutory or regulatory provision or
requirement applicable to a public agreement or transaction;
(c) * * *
(d) Any other cause of so serious or compelling a nature that it
affects your present responsibility.
22.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 contractor has been excluded or disqualified by an
agency of the Federal Government or have 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.
Signature Not Verified
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By:GARIMA MADAN
Signing Date:29.10.2021
19:10:04
(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 have made or agreed to make full restitution.
(h) Whether 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."
31. In this regard, reference may also be made to the decision of a
Coordinate Bench of this Court in Coastal Marine Construction and
Engineering Limited Vs. Indian Oil Corporation Ltd. 2019 SCC Online
Del 6542: wherein the legal position in this regard has been eloquently
explained. The relevant extracts from paragraphs 35, 36, 37, 41 and 42 of
the same read as under:-
"35. It is now well settled that blacklisting a person visits him with
serious adverse consequences. In Erusian Equipment & Chemicals
Ltd v. State of West Bengal: (1975) 1 SCC 70, the Supreme Court
had observed as under:--
"The blacklisting order does not pertain to any particular contract.
The blacklisting order involves civil consequences. It casts a slur. It
creates a barrier between the persons blacklisted and the
Government in the matter of transactions. The blacklists are
"instruments of coercion".
Signature Not Verified
DigitallySigned
By:GARIMA MADAN
Signing Date:29.10.2021
19:10:04
36. The Supreme Court in Gorkha Security Services v. Government
(NCT of Delhi): 2014 SCC OnLine SC 599 had made the following
observation:
"With blacklisting many civil and/or evil consequences follow. It is
described as "civil death" of a person who is foisted with the order
of blacklisting. Such an order is stigmatic in nature and debars
such a person from participating in government tenders which
means precluding him from the award of government contracts."
37. Indisputably, the impugned orders blacklisting the petitioner
have severe adverse consequences for the petitioner. It is not
disputed that the petitioner is essentially involved in executing
contracts for various PSUs and Government agencies. It is usual
for all Government undertakings and PSUs to specify eligibility
criteria that exclude any person who has been blacklisted by any
other Government agency, from participating in contracts or for
tendering for contracts with Government agencies. Undisputedly,
the import of the impugned orders blacklisting the petitioner is that
the petitioner would also be disabled from participating in bidding
processes or entering into contracts with other PSUs and
Government agencies. The magnitude of the punitive measure is
further enhanced as the petitioner has three independent business
verticals and the business of rendering marine support is a small
fraction of the overall business of the petitioner. The impugned
orders would not only affect the petitioner in conducting the
business with regard to marine support but also disable the
petitioner from executing contracts relating to its other business
verticals.
xxx
41. As observed by the Supreme Court in Erusian Equipment &
Chemicals Ltd. (supra), an order of blacklisting casts a slur on the
party being blacklisted and is stigmatic. Given the nature of such
an order and the import thereof, it would be unreasonable and
arbitrary to visit every contractor who is in breach of his
contractual obligations with such consequences.
Signature Not Verified
DigitallySigned
By:GARIMA MADAN
Signing Date:29.10.2021
19:10:04
In Sarku Engineering Services (supra), a Division Bench of the
Bombay High Court considered the case of a contractor (the
petitioner therein) who had been blacklisted on the allegation that
it was responsible for major delay in execution of a contract
entered into with Oil and Natural Gas Corporation Limited
(respondent no. 2 therein). The contractor disputed the allegation
that it was in breach of its obligations; however, Oil and Natural
Gas Corporation Limited found the performance of the petitioner
therein to be unsatisfactory and, therefore, decided to avoid future
dealings with the said petitioner. The question whether the
petitioner therein was, in fact, responsible for the delay was a
disputed question that was pending adjudication by an arbitral
tribunal. In the aforesaid context, the Bombay High Court had
observed as under:--
"58. We hasten to add that there could be a situation wherein the
inherent power of blacklisting or placing the contractor on
Holiday-list can be exercised and the stipulations or the terms of
the contract may not restrict or fetter exercise of such power.
Equally, the mere pendency of legal proceedings cannot be a
absolute bar for invoking this inherent power or exercising it.
However, there have to be strong, independent and overwhelming
materials to resort to this power given the drastic consequences
that an order of blacklisting has on a contractor. The power to
blacklist cannot be resorted to when the grounds for the same are
only breach or violation of a term or condition of a particular
contract and when legal redress is available to both parties. Else,
for every breach or violation, though there are legal modes of
redress and which compensate the party like respondent No. 2, it
would resort to blacklisting and by sometimes abandoning or
scuttling the pending legal proceedings."
42. Plainly, if a contractor is to be visited with the punitive measure
of blacklisting on account of an allegation that he has committed a
breach of a contract, the nature of his conduct must be so deviant
or aberrant so as to warrant such a punitive measure. A mere
allegation of breach of contractual obligations that is disputed, per
se, does not invite any such punitive action. In the present case,
IOCL had relied upon the Blacklisting Guidelines in support of the
Signature Not Verified
DigitallySigned
By:GARIMA MADAN
Signing Date:29.10.2021
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impugned orders. In terms of paragraph 2.1(i) of the Blacklisting
Guidelines, a party could be put on a holiday list if he had
committed a breach of a contract."
(emphasis supplied)
32. On the question of fairness and equality in terms of government
dealing, it may also be appropriate to refer to a recent decision of the
Allahabad High Court in M/s Baba Traders v. State of Uttar Pradesh 2019
SCC OnLine All 3746, wherein the Division Bench observed as under:-
"37. An order of blacklisting has the effect of depriving a person of
equality of opportunity in the manner of public contract and in a
case where the State acts to the prejudice of a person it has to be
supported by legality. The activities of the State having the public
element quality must be imbued with fairness and equality."
33. When the facts of the present case are considered in the light of the
principles laid down in the aforesaid decisions, although I am inclined to
accept the respondent‟s plea that the petitioner was blameworthy to some
extent in not exercising due care while submitting the documents with the
first bid, the fact remains that the said bid did not materialize and therefore,
in my view, the respondent was wholly unjustified in imposing the
maximum penalty of two years as permissible under the terms of the RFP.
There is no doubt that the punishment imposed upon the petitioner was
extremely harsh and disproportionate, especially taking into consideration
my view hereinabove that the respondent‟s decision to hold the petitioner
guilty of misrepresentation and adopting fraudulent practices is wholly
untenable and based on presumption of the petitioner‟s guilt rather than
facts.
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By:GARIMA MADAN
Signing Date:29.10.2021
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34. I have also considered the decisions in Avinash EM Projects Pvt. Ltd.
v GAIL [I] Ltd. 2015 SCC Online Del 7135 and M/s.GAIL India Ltd. v
M/s. Avinash Em Projects Pvt. Ltd. LPA 242/2015 relied upon by the
respondent but find that the same are not applicable to the facts of the
present case. In both these decisions, the Court was dealing with situations
where the petitioner therein was found to be guilty of repeatedly violating
the mandatory commitments as stipulated in the respective RFPs. However
in the present case, it is not even the respondent‟s stand that the petitioner
had failed to carry out any of its obligations under the contract as admittedly
no contract was entered into with the petitioner in respect of either of the
two bids.
35. Considering the fact that both the petitioner‟s bids stand rejected on
account of its own lapses as also the fact that the petitioner has already
suffered a debarment for eleven months which has adversely impacted the
3000 workmen employed by it, I find that remanding the matter to the
respondent at this stage for reconsideration of the debarment period will,
therefore, not be in the interest of justice. I am, thus, of the view that the
impugned debarring order dated 27.11.2020, which has already been in
effect for 11 months, deserves to be modified to the extent that the same will
cease to be in effect from the date of this decision, and therefore, the
petitioner will be eligible to participate in any future tenders floated on or
after the date of this decision.
36. Before I conclude, I may observe that though the petitioner has raised
a plea regarding discrimination and non-adherence to principles of natural
justice, in view of my conclusion hereinabove, I do not deem it necessary to
deal with these aspects, more so since they raise disputed questions of fact
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Signing Date:29.10.2021
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as both parties have taken diametrically opposite stands regarding the
opportunity for personal hearing being granted to the petitioner prior to
passing of the debarring order. For the same reasons, I do not deem it
necessary to deal with the decisions relied upon by the respondent in support
of its plea that no personal hearing to the petitioner was warranted in the
facts of the present case.
37. The writ petition is, therefore allowed by directing that the impugned
order insofar as it debars the petitioner for a period of two years will stand
modified to the aforesaid extent. The pending application is disposed of as
having been rendered infructuous.
(REKHA PALLI)
JUDGE
OCTOBER 29, 2021
sr/ms
Signature Not Verified
DigitallySigned
By:GARIMA MADAN
Signing Date:29.10.2021
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