Gujarat High Court
Silver Touch Technologies ... vs Oil And Natural Gas Corporation ... on 26 August, 2021
Bench: J.B.Pardiwala
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 5434 of 2021
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
==========================================================
1 Whether Reporters of Local Papers may be allowed YES
to see the judgment ?
2 To be referred to the Reporter or not ? YES
3 Whether their Lordships wish to see the fair copy NO
of the judgment ?
4 Whether this case involves a substantial question NO
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
==========================================================
SILVER TOUCH TECHNOLOGIES LIMITED
Versus
OIL AND NATURAL GAS CORPORATION LIMITED
==========================================================
Appearance:
MR NANDISH CHUDGAR WITH MR RUCHIR A PATEL(7954) for the
Petitioner(s) No. 1,2
MR KUNAN B NAIK(3210) WITH MR VIVAN SHAH for the Respondent(s)
No.1
==========================================================
CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
Date : 26/08/2021
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
1. By this writ-application under Article 226 of the Constitution
of India, the writ-applicants have prayed for the following reliefs:-
"15(A) Be pleased to issue a writ of mandamus, or a writ in the
nature of mandamus or any other appropriate writ, order and/or
direction quashing and setting aside the impugned order dated
23rd November, 2020 (Annexure A hereto) passed by the
Respondent, imposing a ban on the petitioner, in the interest of
justice:
(B) Be pleased to issue a writ of mandamus, or a writ in the
nature of mandamus or any other appropriate writ, order and/or
direction quashing and setting aside the inquiry conducted
against the petitioner company vide show cause notice dated 17 th
July 2020 (Annexure J hereto), in the interest of justice;
(C) Pending the admission, hearing and final disposal of the
present petition, be pleased to grant stay over the
implementation and execution of the impugned order dated 23 rd
November, 2020 (Annexure A hereto) passed by the Respondent,
imposing a ban on the petitioner in the interest of justice;
(D) An ex-parte ad-interim relief in terms of prayer C above may
kindly be granted;
(E) Be pleased to pass any other and further order(s) or relief(s)
as may be deemed fit in the facts and circumstances of the case
in the interest of justice."
2. The facts giving rise to this litigation may be summarized as
under:-
2.1 The writ-applicant is a company incorporated under the
provisions of the Companies Act, 1956 [now governed by the
Companies Act, 2013 (for short 'The Act, 2013')] and is engaged in
the business of Software Services System Integration, E-Governance
Solutions and Digital Transformation.
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
2.2 It appears that in August, 2019, the respondent - O.N.G.C.
invited bids for the supply, installation and commissioning of seven
high-end workstations with three years warranty vide the Tender
No.D31KC19011. The period prescribed was from 23 rd August, 2019
to 17th September, 2019.
2.3 It is not in dispute that upon opening of the financial bids,
the price offerred by the writ-applicants was found to be the
lowest. However, a controversy cropped up as regards the Price Bid
Format. The confusion that arose was whether the rates were to be
submitted per unit or for all the seven units.
2.4 It appears that during the meeting convened on 05.11.2019
i.e.the date on which, the financial bids were opened, it was sought
to be clarified on behalf of the writ-applicants before the O.N.G.C.
that the rates quoted by them were on per unit basis. A letter was
addressed by the O.N.G.C. dated 27.11.2019 awarding the contract
in favour of the writ-applicants for a total price of Rs.8,85,927/-
[which was the unit price quoted by the writ-applicants].
2.5 The aforesaid was a rate quoted by the writ-applicants of a
single unit and not the total price of the entire contract. From this
point of time, the disputes arose between the parties.
2.6 It is also not in dispute that ultimately, the contract which
was awarded in favour of the writ-applicants came to be cancelled
and the O.N.G.C. had to issue a fresh tender notice.
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
2.7 The subject matter of challenge in the present writ-application
is not the order cancelling or terminating the contract. The subject
matter of challenge is the order passed by the O.N.G.C. blacklisting
the writ-applicants for a period of six months. This period of six
months has also expired. However, the writ-applicants want to
pursue this litigation as according to them, if the order of
blacklisting remains, then it would be a blemish on them for all
times to come. In such circumstances, we are called upon to
examine the legality and validity of the order passed by the
O.N.G.C. blacklisting the writ-applicants.
2.8 We first start with the tender conditions. The condition
no.33.0 provides for putting the supplier on holiday on account of
cancellation of the purchase order. Condition No.33.0 reads thus:-
33.0 Putting Supplier on Holiday due to Cancellation of Purchase
Order. -
In case of cancellation of the purchase order(s) on account of
delay in execution of the order or non-execution of the order
and/or annulment of the award due to non-submission of
Performance Security or, failure to honour the commitments
under 'Warranty & Guarantee' requirements following actions
shall be taken against the Supplier:
i. ONGC shall conduct an inquiry against the Supplier and
consequent to the conclusion of the inquiry, if it is found that
the fault is on the part of the Supplier, then they shall be put on
holiday [i.e. neither any tender enquiry will be issued to such a
Supplier by ONGC against any type of tender nor their offer will
be considered by ONGC against any ongoing tender(s) where
contract between ONGC and that particular Contractor (as a
bidder) has not been concluded] for a period of two years from
the date the order for putting the Contractor on holiday is
issued. However, the action taken by ONGC for putting that
Supplier on holiday shall not have any effect on other ongoing
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
PO(s), if any with that Supplier which shall continue till expiry
of their term(s).
ii. Pending completion of the enquiry process for putting the
Supplier on holiday, ONGC shall neither issue any tender enquiry
to the defaulting Supplier nor shall consider their offer in any
ongoing tender.
2.9 We now go to Annexure-C (Collectively) Page-133 of the
paper-book. This document is the Price Bid Format. It reads thus:-
ANNEXURE V - PRICE BID FORMAT
Sr. BIDDERS TO FILL ONLY THE WHITE BOXES. THIS IS UNPRICED BID. DO NOT
No. QUOTE PRICES HERE. CHOOSE FROM THE DROP DOWN AGAINST EACH ITEM
TO INDICATE THAT THERE IS A QUOTE AGAINST THIS ITEM IN THE PRICED
BID. FILL IN THE WHITE SPACES ONLY
I Bidders complete name Silver Touch Technologies Ltd.
II Manufacturer's name and address M/s. Dell International Services India
Pvt. Ltd.
Divyashree Greens, No.12/1, 12/2A &
13/1A, Koramangala, Inner Ring Road,
Domlur Post,
Bengalure-560 071,
Karnataka, India
III Bidders address including fax no. & e- 2nd Floor, Saffron Tower, Nr. Panchwati
mail Circle, Ambawadi, Ahmedabad -
380006, Gujarat, 079-26563158, 079-
26561624
IV Bidder's bid number & date STTL/HOMKTG/JP/2019-20/ 1609 dated
16/09/2019
V Validity of bid 90 days from the date of opening of Un-
priced Techno-commercial Bid (as per
Tender)
VI Currency of bid Indian Rupees (INR)
VII EMD details Rs.1,98,000/-B.G.No.:2004IPEBG190219,
dated 13.09.2019 valid till: 12.02.2020
VIII Detail of bank including address, Bank of India, Nr. Town Hall,
account no., Type of account (eg. Ahmedabad, Cash Credit Account, Ph.
Saving, Current etc.) Tel no., fax no. No.079-26577158, Fax No.079-26575932
IX GST details 24AACCS6474P1ZR
X No. of packages 7 packages
XI Weight of each Package Approx. 20 Kgs
XII Total Weight of all the packages Approx.150 Kgs
XIII Total Volume of package As per enclosed Datasheets
Workstations as per the Specifications including all the accessories, installation and
commissioning.
Mat Code OCD630000
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
Qty. 07 Nos.
Area of operation Non PEL/ ML
Make DELL
Model Precision 7920 Tower
Sl. Elements Price (INR)
No.
1 Basic Price 885927
2 Packing & Forwarding Charges, if any 0
3 Ex-Works Price (1+2) 885927
4 GST (5%) on (3) * 44296.35
5 Total Ex-Works Price (3+4) 930223.35
9 Total FIR Destination Price (5+6+7+8) 930223.35
1. Rates should be quoted on FOR Destination, ONGC, IRS, Ahmedabad-
380005 basis.
2. Discount: Bidders are advised not to indicate any separate discount.
Discount, if any should be merged with the wuoted prices.
3. NOA will be issued to the bidder in case the bid has been determined to
be in full conformity to the bid documents and has been determined as it.
4. Payment terms:
No Advance payment will be made.
100% Payment of the FOR Destination price including Taxes & Duties against Supply of material at
ONGC's designated Stores after satisfactory ins]
The invoice/bill is to be raised in the name of "I/C-Pre-audit, IRS, ONGC, Ahmedabad".
2.10 The relevant part in the aforesaid is Sr.No.XIII and the
quantity. Sr. No.XIII provides for the Total Volume of Package and
it has to be as per the enclosed datasheets.
2.11 We now look into Page-134. Page-134 contains the
Instructions for the Domestic Bidders . The relevant part reads thus:-
"Instructions for Domesting Bidders.- Price to be quoted is
EXW price per unit excluding Excise dut and Sales tax. Unit size
by default is 1. If this value is changed, then the changed value
will be applicable for Freight charges quoted under
Consigneewise distribution. Excise duty to be entered in %. In
case of PEL/ML area items, you will see pricing element Less ED
on DEB. He please enter ED% refundable to you on account of
deemed export benefits and hence not charged to ONGC."
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
2.12 The O.N.G.C. seeks to rely on Annexure-C [collectively]
referred to above, whereas, the writ-applicants seek to rely on the
Instructions for Domestic Bidders referred to above. According to
the writ-applicants, it is on account of the instructions referred to
above that the confussion arose.
2.13 We now look into the first letter addressed by the writ-
applicants to the O.N.G.C. dated 27.11.2019 requesting to consider
the quoted rate for one single workstation and amend the purchase
order accordingly. The letter reads thus:-
27.11.2019
Ref: STTL/ONGCIRS/2719
To,
Office of I/C-MM
Oil & Natural Gas Corporation Limited
Institute of Reservoir Studies,
Chandkheda, Ahmedabad-380005
Sub: Amendment in Purchase Order.
Reference:
Tender No.D31KC19011 for Supply, Installation And Commissioning of
Seven High-end Workstantions with Three Year Warranty for IRS,
ONGC, Ahmedabad.
NOA No.AMD/IRS/SUPPORT/MM/2019/416664
Dear Sir/madam,
Thank you for your NOA for High End Workstations. We would like to
draw your kind attention towards the commercials. There is a calcution
mismatch in your purchase order. The Quoted Price is for Single
Workstation and the same we have clearly mentioned in commercial
bid in your online portal.
We request you to kindly amend the value of NOA, so that we can
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
process further. We herewith attaching screenshot of "conditins" of
you commercial bid portal where we have mentioned our unit rate i.e.
Rs.885927. We have specified our unit rate for single workstation in
the Item>>Conditions clause on you e-procurement bidding portal.
Screenshot for the same is attached herewith.
Therefore, we would request you to please consider quoted rate for
single workstation and amend purchase order accordingly.
Looking forward for your positive reply.
For, Silver Touch Technologies Ltd.
Sd/-
Sumit Solanki
Business Manager
2.14 To the aforesaid, the O.N.G.C. replied vide its letter dated
05.12.2019 as under:-
OIL AND NATURAL GAS CORPORATION LIMITED
INSTITUTE OF RESERVOIR STUDIES
OFFICE OF IN-CHARGE (MM)
CHANDKHEDA CAMPUS, AHMEDABAD - 380 005
Phone No.079-23295612/654/631 fax no.079-23291662
[email protected], [email protected]
No.AMD/IRS/SUPPORT/MM/2019/416664 05.12.2019
To,
M/s. Silver Touch Technologies Ltd.
2nd floor, Saffron Tower,
Nr. Panchwati Circle,
Ambawadi, Ahmedabad
Phn: 079-26563158, 9925232159
Kind Attention: Sumit Solanki, Business Manager
[email protected]
Dear Sir,
In view of your letter no.STTL/ONGCIRS/2719 dtd.27.11.2019 in
response to NOA no.AMD/IRS/SUPPORT/MM/2019/416664,
dtd.27.11.2019 for supply, installation and commissioning of seven
high-end workstations with three year warranty against Tender
No.D31KC19011, ONGC hereby directs your attention to BEC clause
B.2.3 wherein BRS was provided at Appendix 9, which is the exact
replica of the price formate with option for bidders to mention whether
they have quoted the various price elements in the price bid or not. At
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
Appendix 9 submitted by you, it has been clearly confirmed in your
techno-commercial bid that you have quoted prices in ONGCs price bid
format. In view of the same and clause B.2.3, there was no scope of
ambiguity regarding the price bid submitted by you.
Further, mentiong of prices in any form other than the fomat provided
by ONGC is a commercial rejection criterion as per BEC clause B.2.5(e)
which states that offers which do not conform to ONGC's price bid
format at e-tender portal shall be rejected.
In view of the above, price mentioned in the Price Bid Format attached
under 'Notes and Price Bid Attachment' tab at e-portal which is
opened on the date of Price Bid Opening in presence of the qualified
bidders has been considered for evaluation to rank the bidders.
As BEC clauses and tender conditions are supreme to uphold fairness
and integrity of ONGC's tendering procedure, no change in the NOA
can be made.
Thus, you are asked to honour the NOA placed in line with your Price
Bid uploaded on the E-Portal and submit the SD/PBG within the
stipulated time as per NOA and deliver the material as per the delivery
schedule, failing which the necessary action shall be taken as per the
Terms and Conditions of the Tender.
sd/-
(Kartika)
Sr. MMO
IRS, ONGC, Ahmedabad
2.15 Thereafter, series of correspondence took place between the
parties on the dispute. As noted above, the purchase order
ultimately came to be cancelled by the O.N.G.C. as the O.N.G.C.
did not deem fit to accede to the request of the writ-applicants. It
appears that on account of all the aforesaid, the O.N.G.C. thought
fit to invoke the Clause-33.0 of the tender condition for the purpose
of putting the writ-applicants on holiday [blacklisting]. The
Corporation first issued a show-cause notice dated 17.07.2020,
Annexure-J, Page-149 to this writ-application. The show-cause
notice reads thus:-
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
OIL AND NATURAL GAS CORPORATION LIMITED
INSTITUTE OF RESERVOIR STUDIES
CHANDKHEDA CAMPUS, AHMEDABAD.
Phone No.079-23295751, Fax No.079-23291662
e-mail: [email protected]
No.IRS/G&G/INQ/2020-21/1 Dated 17th July 2020
To,
M/s. Silver Touch Technologies Ltd.
2nd floor, Saffron Tower,
Nr. Panchwati Circle,
Ambawadi, Ahmedabad
Phn: 079-26563158, 9925232159
Mail: [email protected]
Vendor Code:138006
Subject: Show cause notice upon cancellation of NOA No.AMD/IRS/
SUPPORT/MM/2019/416664 dated 27.11.2019 awarded to M/s. Silver
Touch Technology Ltd., Ahmedabad (vendor code no.138006) for
supply, installation and commissioning of seven high end work stations
with three warranty.
1. Consequent to approval of CPA, NOA No.AMD/IRS/SUPPORT/MM/
2019/416664 dated 27.11.2019 was placed on M/s. Silver Touch
Technologies Ltd. For supply, installation and commissioning of
seven high-end workstations with three year warranty on FOR
destination basis for INR 9,30,223.35 (Nine Lakh Thirty Thousand
Two hundred Twenty Three rupees and Thirty Five paisa only).
2. Supplier vide mail dated 27.11.2019 sought amendment to NOA.
3. TC delibrated the issue on 5.12.2019. TC proposed that the
representation made by the bidder does not derserve merit for
consideration and no change in the NOA can be made. This was
duly approved by the CPA. Reply given to the M/s. Silver Touch
Technology Ltd., Ahmedabad accordingly.
4. M/s. Silver Touch Technology Ltd. expressed their inability to
execute the order vide mail dated 01/01/2020. "Our company will
not be in a position to execute the NOA no.AMD/IRS
SUPPORTMM/2019/41664 dated 27.11.2019 at the cost of
Rs.9,30,223.35/- (Nine lakh thirty thousand two hundred twenty
three rupees and thirty five paisa only) for the supply of Seven (7)
workstations however, we are ready to supply One (1) Workstation
at this price as quoted by us. Our company is aware that ONGC
forfeits the EMD amount (i.e. our Bank Guarantee) in such
situation, therefore we have deposited Rs.1,98,000 to ONGC
account no.10257776699 on 01.01.2010. UTR Number for the same
is BKIDN 20001401236. Proof is attached herewith for your kind
reference.
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
ONGC IRS is requested to release our BG No.2004IPEBGI90219
dated 13.09.2019 for an amount of Rs.1,98,000/- as soon as
possible."
5. On account of non-execution of the order and non-submission of
PBG, NOA No.AMD/IRS/SUPPORT/MM/2019/416664 dated
27.11.2019 was cancelled and EMD forfeited as per provisions of
clause 23.8(c) of tender document.
"(The Bid Security shall be forfeited by ONGC in the following
events:(a) If Bid is withdrawn during the validity period or any
extension thereof duly duly agreed by the Bidder. (b) If Bid is
varied or modified in a manner not acceptable to ONGC during
the validity period or any extension of the validity duly agreed by
the Bidder. (c) If a Bidder, having been notified of the acceptance
of its bid, fails to furnish Security Deposit/ Performance Baond
within 15 days from the date of issue of LOA/NOA)"
6. In light of above mentioned, ONGC has initiated inquiry against
M/s. Silver Touch Technologies Ltd. and undersigned has been
appointed as the inquiry officer.
"(In case of cancellation of the purchase order(s) on account of
delay in execution of the order or non-execution of the order and/
or annulment of the award due to non-submission of Performance
Security or failure to honour the commitments under 'Warranty &
Guarantee' requirements followin actions shall be taken against the
Supplier.
i) ONGC shall conduct an inquriry against the Supplier and
consequent to the conclusion of the inquiry, if it is found that the
fault is on the part of the Supplier, then they shall be put on
holiday [i.e. neither any tender enquiry will be issued to such a
supplier by ONGC against any type of tender nor their offer will
be considered by ONGC against any ongoing tender(s) where
contract between ONGC and that particular Contractor (as a
bidder) has not been concluded] for a period of two years from
the date the order for putting the Contractor on holidy is issued.
However, the action taken by ONGC for putting that Supplier on
holiday shall not have any effect on other ongoing PO(s), if any
with that Supplier which shall continue till expiry of their term(s).
ii) Pending completion of the enquiry process for putting the
Supplier on holiday, ONGC shall neither issue any tender enquiry
to the defaulting Supplier nor shall consider their offer in any
ongoing tender.)"
7. In view of the natural justice, you are, therefore and hereby called
upon show cause circumstances appearing against you in writing
within 10 days (ten days) from the date of issue of this notice: as
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
to why your finn shout not be banned/put on holiday, failing
which it shall be presumed that you have nothing to say in the
matter and further expert decision shall be taken as deemed fit by
ONGC.
B.K. Panda
GM (Geol)
Inquiry Officer
2.16 To the aforesaid show-cause notice issued by the Corporation,
the writ-applicants filed its reply dated 27.07.2020; Annexure-K,
Page-151 to this writ-application. The same reads thus:-
Ref: STTL/ONGCCIRS/2720 Date: 27th July, 2020
To,
Shri B.K. Panda
GM (Geology)
ONGC, IRS, Ahmedabad-380005
Sub: Supply, Installation and commissioning of Seven High-end
Workstantions - Justification for non-banning of business dealings.
Reference:
Show cause notice letter No.IRS/G&G/ING/2020-21/1, dated 17.07.2020
Dear Sir/ Madam,
With reference to your show cause notice vide letter no.IRS/G&G/INQ/
2020-21/1 dated 17.07.2020 and the above said references, we would
like to submit the following.
1. The said tender was two bid system i.e. Technical and Commerical.
After uploading technical bid documents when we have started to
prepare the price-bid, we found that there were two Forms.
Price bid in Excel format
One Form under item Conditions clause on ONGC E-tender
portal.
In the price-bid (i.e.excel version), there was Base price element
mentioned but there was no clarity whether to quote Basic price of
Single unit or Basic Price of 7(Seven) Units, we have mentioned
Basic price of Single Unit and for the clarity we have mentioned
price per unit under Item>>Conditions Clause on ONGC E-Tender
portal and the same was part of the Bid and the Part of Bidding
Process.
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
The Screenshot of price bid/unit submitted on your E-Tender Portal
is attached for your reference. Screenshots are placed at Annexure-I
(one page) and Annexure-II (one page).
After the bid was accepted technically by ONGC, we have been
called for the commercial bid opening at IRS, Ahmedabad and
during the price-bid opening, we have conveyed to the MM officer
that quoted rates are unit rate and shown them where we have
mentioned on the ONGC-Tender portal. We have also informed the
same through letters. Please find herewith the letter copies
enclosed. You will find letter copies at Annexure-III (7 pages).
It can be seen that the rates of other bidders namely M/s. Dotcad
Private Limited and M/s. Cygnus (Mumbai) for total 7 Unit
including taxes was Rs.61,66,650/- and Rs.64,78,290/- respectively.
If our quoted unit rate Rs.9,30,223.35/- is multiply by 7 which
comes to Rs.65,11,563.45/- which is a clear indication that it was
a misunderstanding of financial bid format.
2. We are one of the registered Vendor at ONGC (i.e.Vendor Code
138006) since last 10+ years and have successfully executed around
30 contracts of ONGC since then. Enclosed herewith the few
PO/Contracts summary placed at Annexure-IV (one page), we have
executed in ONGC throughout the difference locations across
Gujarat.
We would also like to highlight the fact that we have successfully
executed high performance Cluster Contract at IRS Abacus Centre,
Ahmedabad. Period of Contract was from year 2014 to 2017 and
2017 to 2020 (6 years). Enclosed herewith the NOA copies at
Annexure-V-A (one page) and V-B (Two Pages) for your kind
consideration. In additional to that, we are also managing the AMC
Contract of Disk Storage System FAS 8020 & FAS 2254. Duration
of that contract is from 14.05.2019 to 13.05.2022. Please refer to
the NOA copy at Annexure-V-C (Two page).
In a nutshell, we can say that we have a good track record with
IRS and all other locations of ONGC across Gujarat.
3. We would like to inform you that we are working with lots of
Central Ministry Organizations where we have done various
Software Development Project which includes Website
Development, Mobile app development etc., We have attached
[Annexure-VI (no. of pages: 4 (four) out Major Project list to
showcase the Credentials of Our Company.
We are working with many reputed PSU's and their procurement
policy is not to penalize the vendor for the unintentional or first
mistake so we request the ONGC being a highly reputed PSU, give us
an opportunity to continue business relationship with your esteemed
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
organization.
Considered the justfication given above and our long association with
ONGC, we hereby request not to initiate the banning of business
dealings/ blocking the vendor code. Also requested to un-block the
vendor code as early as possible.
Looking forward for your positive reply.
Thanking you,
For silver Touch Technologies Ltd.
sumit Solanki
Business Manager
Enclosed
Annexure-I : Price bid format
Annexure-II : Screenshot of the unit price bid submitted on ONGC Portal
Annexure-III : letter copies written to ONGC IRS
Annexure-IV : Details of Projects Executed in ONGC (Partial List)
Annexure-V-A : NOA Copy for AMC of HPC cluster for 3 years (duration: 2014-2017)
Annexure-V-B : NOA Copy for AMC of HPC cluster for 3 years (duration: 2017-2020)
Annexure-V-C : NOA Copy for AMC of Disk Storage System (duration: 2017-2020)
Annexure-VI : Major Software Projects Summary in Govt. Sector.
2.17 Ultimately, the final order came to be passed by the
Corporation dated 23.11.2020; Annexure-A, Page-28 to this writ-
application, which reads thus:-
OIL AND NATURAL GAS CORPORATION LIMITED
INSTITUTE OF RESERVOIR STUDIES
OFFICE OF IN-CHARGE (MM)
CHANDKHEDA CAMPUS, AHMEDABAD - 380 005
Phone No.079-23295612/654/631 fax no.079-23291662
[email protected], [email protected]
No.AMD/IRS/SUPPORT/MM/2019/416664 23.11.2020
To,
M/s. Silver Touch Technologies Ltd.
2nd floor, Saffron Tower,
Nr. Panchwati Circle,
Ambawadi, Ahmedabad
Phn: 079-26563158, 9925232159
Vendor code-138006
Email: [email protected]
(WITHOUT PREJUDICE)
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
Sub.: Banning of Business dealing with M/s. Silver Touch Technologies
Ltd., Vendor code: 138006
Reference:
i. NOA no.AMD/IRS/SUPPORT/MM/2019/416664, dtd.27.11.2019 for
supply, installation and commissioning of seven high-end
workstations with three year warranty against Tender
No.D31KC19011.
ii. Intimation for NOA cancellation sent via mail dtd.07.01.2020.
iii. Letter for suspension of Business dealing with M/s. Silver Touch
Technologies Ltd. dtd.12.03.2020.
1. Whereas, ONGC Institute of Reservoir Studies had invited tender
No.D31KC19011 for supply, installation and commissioning of seven
high-end workstantions with three year warranty.
2. Whereas, NOA No.AMD/IRS/SUPPORT/MM/2019/416664, dtd.
27.11.2019 was placed on M/s. Silver Touch Technologies Ltd.
Vendor Code: 138006 for supply, installation and commissioning of
seven high-end workstantions with three year warranty.
3. Whereas, M/s. Silver Touch Technologies Ltd. expressed their
inability to execute the order. On account of non-execution of the
order and non-submission of PBG, NOA No.AMD/IRS/SUPPORT/MM
/2019/416664, dtd.27.11.2019 was cancelled and EMD forfeited as
per provsions of clause 23.8(e) of Annexure-1 of tender document.
4. Whereas, as per ONGC procedure an enquiry officer was appointed
for conducting an enquiry into the matter in fair and impartial
manner. Whereas the enquiry officer had issued Show Cause letters
dated 17.07.2020 to M/s. Silver Touch Technologies Ltd. seeking
explanation. M/s. Silver Touch Technologies Ltd. submitted their
written reply on 27.07.2020. Hence, procedure of natural justice
has been complied with.
5. Whereas, the enquiry officer after examining the case & delibrating
the above facts came to the conclusion of putting the firm on
holiday for a period of six months from the date of suspension of
business dealing with the firm.
6. Whereas, having given an impartial, predent and careful
consideration to the facts, enquiry report, ONGC has come to the
conclusion that contractor has failed to honour the contractural
obligations & violated the terms & conditions of the tender.
7. Accordingly, ONGC has decided in accordance with clause 41 of
the tender document and in accordance with its Integrated
Materials Management Manual, to ban all business dealing with the
Vendor M/s. Silver Touch Technologies Ltd. Vendor Code: 138006
along with its allied concerns, Partners or Associate or Directors of
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
Proprietors involved in any capacity for a period of six months
w.e.f.12.03.2020 i.e. the initial date of suspension of business
dealings with the firm.
8. During the banning period neither any tender enquiry will be
issued by ONGC to the vendor M/s. Silver Touch Technologies Ltd.,
Vendor Code: 138006 along with its allied concerns, Partners or
Associates or Directors or Proprietors invloved in any capacity
against any type of tender(s) of ONGC by their offer will be
considered by ONGC against any of the ongoing tender(s)
....illegible.... contract between ONGC and M/s. Silver Touch
Technologies Ltd. has not been concluded, for a period of six
months w.e.f.12.03.2020 i.e.the initial date of suspension of
business dealing with the firm.
sd/-
ED. HOI
O.N. Gyani
EO- Head - IRS
Copy to
1. ED-Chief MM, ONGC Deendayal Urja Bhavan, New Delhi-110070.
2. Head Corporate Vendor Management Cell, 2 nd Floor, Deendayal Urja Bhavan,
Nelson Mandela Marg, Vasant Kunj, New Delhi-110070 with a request to upload
details on MM website.
3. Head ICE, Scope Minar, New Delhi: For blocking Vendor Code No.138006 in SAP
system & SRM-e portal.
3. Being dissatisfied with the aforesaid, the writ-applicants have
come before this court with the present writ-application.
SUBMISSIONS:-
4. Mr. Nandish Chudgar, the learned counsel appearing for the
writ-applicants vehemently submitted that the action on the part of
the Corporation in passing the impugned order of blacklisting could
be termed as arbitrary and unreasonable. He would submit that his
client bonafide quoted the price as a rate of single unit and not the
total price of the entire contract. According to Mr. Chudgar, the
form under the item condition clause on O.N.G.C. E-tender portal
which is to be filled up as part of the bid process shows the unit
size by default as one. In such circumstances, according to Mr.
Chudgar, his client quoted the price of single unit. He would
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
submit that his client earnestly requested the Corporation to
accordingly amend the notice of award to per unit, however, the
Corporation declined to do so. According to Mr. Chudgar, his client
was left with no other option, but to honour the offer and supply
all seven workstations for the rate of one workstation quoted by
him. In other words, his client was asked to execute the contract,
which was otherwise valued at approximately Rs.95 - Rs.99 lac [as
per EMD @ 2%] for an amount of Rs.9,30,223.35 only and failing
which, the Corporation would invoke the bank guarantee for failure
to execute the contract. Mr. Chudgar submitted that despite
requesting the Corporation not to invoke the bank guarantee, the
same was ultimately encashed.
5. Mr. Chudgar would argue that to resolve the dispute
amicably, his client informed the O.N.G.C. vide letter dated
23.12.2019 that the writ-applicant was ready to perform the
contract on the basis of the price offered by him of a single unit
multiplied by the number of units. He pointed out that
Rs.1,98,000/- towards the EMD also came to be forfeited.
6. Mr. Chudgar submitted that the Inquiry Officer failed to
consider the written submissions filed on behalf of his client dated
27.07.2020. According to him, the impugned order of blacklisting is
not a speaking order and the same has been passed in a mechanical
manner. In the last, Mr. Chudgar submitted that the business record
of his client so far has been absolutely clean. This is for the first
time that his client was put in the holiday-list for no fault on his
part. He would submit that if the impugned order of blacklisting is
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
not quashed and set aside, then his client will not be able to
participate in any tender process for atleast a period of three years
because in all fresh tender notices, its being asked, whether in last
three years, there has been any order of blacklisting or not? In
such circumstances referred to above, Mr. Chudgar prays that there
being merit in his application, the same be allowed and the
impugned order be quashed and set aside.
7. On the otherhand, this writ-application has been vehemently
opposed by Mr. Kunan Naik, the learned counsel appearing for the
Corporation. Mr. Naik would submit that no error not to speak of
any error of law could be said to have been committed by the
Corporation in passing the impugned order.
8. Mr. Naik would submit that the defence put forward by the
writ-applicants is not bonafide. It is alleged that the writ-applicants
had understood the terms of the tender correctly, but still very
conveniently misconstrued those and took a chance by offering the
quoted price.
9. Mr. Naik invited the attention of this Court to the affidavit-
in-reply filed on behalf of the Corporation, more particularly, the
following averments.
5. With reference to contents of paragraph 1 of the
captioned petition, I deny the statements, averments, submissions
and allegations made therein. I humbly state that it is a matter
of fact that after award of contract by way of Notice of Award
dated 27.11.2019 to the petitioner company, the petitioner
company refused to perform the contract for which an inquiry
was initiated against the petitioner company. The petitioner
company has accepted its inability to perform the contract and
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
hence for such default order dated 23.11.2020 has been passed
against the petitioner company. I deny that there was any
ambiguityin respect of quoting of price bid as alleged or
otherwise. I humbly state that the petitioners have either
inadvertently or deliberately failed to bring to the notice of this
Hon'ble Court that there were four bidders who had participated
in the bidding process and none of the bidder has ever raised
question with regard to any ambiguity in the price bid. I deny
that the respondent was commanding the petitioner company to
execute the contract for supply of 7 workstations for an amount
of approx. Rs.9 lacs as against their own estimation of the
contract value of approx Rs.95 - 99 lacs as alleged or otherwise.
I humbly state that the petitioner company has itself submitted
its price bid and was called upon to perform the contract as per
the price quoted by it. It is the petitioner company that has
refused to perform the contract. I deny that there was any
arbitrary command of execution of contract as alleged by the
petitioner. The petitioners as per their own assertions in the
captioned petition are participating in the notice inviting tenders
floated by the respondent since long time and hence they were
expected to submit their tender with utmost sincerity and
seriouness; however, it transpires from the record that the
petitioners have not acted bonafide in the present case because of
which the respondent has suffered loss and damage. I do not
admit that the impugned action of banning has a cascading effect
of debarring the petitioner company from even participating in
several tender processes for the tenders floated by the several
governments and other authorities as alleged or otherwise. I do
not admit that at present, because of the impugned banning
order of the respondent, the petitioner company is not eligible to
participate in many tender processes as alleged or otherwise. I
humbly state that the respondent has neither informed any
agency of banning nor has created any condition for ineligibility
of petitioner company to participate in any other tender floated
by any other agency. If the petitioner is aggrieved by any
condition of the tender issued by any other agency, then the
petitioners should have challenged such tender conditions.
However, for such ineligibility challenge to the order assessed by
the respondent is unsustainable on facts and untenable in law.
5.1 I humbly state that Tender No.D31KC19011 ('the subject
NIT' for short) was floated for procurement of seven workstations
with three year warranty with bid submission period from
23.08.2019 to 17.09.2019. The subject NIT was in two-bid system
format. The petitioner along with other bidders has participated
in the subject NIT. It is relevant to note at this juncture that
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
Techno-Commercial Bid in Appendix-9 has bidders response sheet
which gives an opportunity to a bidder to verify that whether
the bidder has quoted the correct price for seven packages of the
product tendered for. In case of the petitioner company, it has
confirmed that it has quoted price for seven packages in its price
bid.
5.2 I humbly state that the subject NIT in its clause 9.4 of
Annexure-1 clearly states that the bidders can submit the queries
to the tender inviting office within 10 days of the publication of
NIT. Thus, the petitioner company had an opportunity to resolve
any queries with regard to any ambiguity found by it in the
subject NIT. The petitioner company, however, has not raised
any query within the stipulated period. Had the petitioner
company any query for any confusion on its part with regard to
quoting price, it was expected to raise the same as stipulated in
the said clause 9.4. The petitioner company for the reasons best
known to it has kept convenient silence till the price bids were
opened and thereafter has made an attempt to force the
respondent to purchase the product at higher rates. Such an
attempt on the part of the petitioners lacks bonafide which shows
that the petitioners have not acted with clean hands.
5.3 I humbly state that the subject NIT was made available
for download on 23.8.2019 and last date for communication of
exceptions, deviations along with suggested changes was
3.9.2019. Closing time for submission of bids and opening of
techno commercial bids was on 17.09.2019 and then price bids
were opened on 5.11.2019. The petitioner company had therefore
ample opportunity and time at its hand to withdraw its bid
before opening of price bids. The petitioner company is expected
to and must have verified its price bid before finally submitting
the same. Had it been a case of genuine mistake of quoting
wrong price then the petitioner company could have corrected
such mistake by pointing out to the respondent or by
withdrawing the bid. The petitioner company had time fo almost
2 months after submission of bids to act, to correct its mistake;
however, there was no action on the part of the petitioner
company. This shows that now contending that there was an
ambiguity in the condition providing condition for submission of
price bid is nothing but an afterthought. At this stage, it may
also be relevant to note that the petitioner company has accepted
order dated 23.11.2020 and has also served the banning period,
thus the captioned petition does not suffer only from vice of
delay and laches but also from the vice of afterthought and an
attempt to indirectly challenge conditions of notice inviting
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
tender floated by other agencies. The petitioner could not and
ought not to have tried to cloak their own conduct under the
guise of ambiguity in the tender documents more particularly
when there exists none. The respondent floats several Notice
inviting Tenders and till today none of the bidder has even
complained of and raised query with regard to any ambiguity in
the conditions incorporated for submission of price bid. In my
humble all the price bids are required to quote total cost/
amount and there is no automatic field which fetches total price
based on price of one unit as alleged by the petitioners. Several
hundreds and thousands of bidders regularly participate in notices
inviting tenders floated by the respondent who follow the same
practive of quoting the total price. Thus, the captioned petition
deserves to be rejected only on this count when the petitioners
have tried to misrepresent facts before this Hon'ble Court.
5.4 I humbly state that the petitioners are expected to and
must have examined all the terms and conditions of the subject
NIT which clearly provided that the respondent was required to
finalize the purchase within a limited time schedule and therefore
the bidders were advised to ensure that their bids are complete
in all respects and conform to terms and conditions of bid
evaluation criteria of the tender. Further the bidders were
required to quote for full quantities of goods and no bid was
permitted modification after the deadline of submission of bids.
The petitioners were therefore required to strictly adhere to the
term and conditions of the subject NIT. The petitioners were also
aware that in case of default they would face banning
proceedings under clause 33 of Annexure-1 and 41 of Annexure-
2. Thus, now challenging banning order dated 23.11.2020 is
absolutely unjustified, unreasonable and unfair on the part of the
petitioners. I humbly state that because of the conduct of the
petitioners, the respondent had to undergo the whole procedure
from Notice inviting Tender to award of contract again which
has resulted into absolutely unnecessary loss of time, energy and
resources. Thus, banning for such a conduct of petitioners and
that too for a period of six months which is the least period of
banning is absolutely legal, just and proper.
5.5 I deny that the impugned order is arbitrary passed
without affording opportunity of personal hearing and thus in
breach of principles of natural justice is an unreasoned order and
bad in law as alleged or otherwise. I deny that the impugned
order does not consider the explanation and clarification of the
petitioner company at all that the price quoted was on per unit
basis and therefore the respondent cannot thrust upon the
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
petitioner company to execute the contract and supply all 7
workstations for the price of 1 workstation. I humbly state that,
if it was not possible for the petitioner company to perform the
contract, it ought to have withdrawn its bid before opening of
price bid; however, the petitioners have tried to thirst upon the
respondent goods at higher price. Thus, such an attempt on the
part of petitioners clearly smaks of unfair and unreasonable
conduct. The petitioners have tried to show as if their conduct
has been bonafide throughout, but the correspondence initiated
by the petitioner clearly show that they wanted the respondent
to execute the contract at higher rates. Thus, the captioned
petition deserves to be rejected.
5.6 I humbly state that the petitioners have alleged that they
have not been afforded an opportunity of personal hearing and
therefore the impugned order is in breach of principles of natural
justice. I humbly state that such allegation and avement is not
only baseless but contrary to the settled position of law
propounded by the Hon'ble Apex Court. The Hon'ble Apex Court
in catena of decisions has held that once the show-cause notice
is given an opportunity to reply to the show-cause notice is
afforded, it is not necessary to give an oral hearing. I humbly
state and submit that in commercial disputes the fact finding
inquiry cannot be equated with a full-fledged inquiry or trial.
The right and obligations governed under the contract provides
for basic inquiry to examine the correctness of the facts and
cannot be converted into full-fledged trial or inquiry. The
petitioners once have agreed to the contractural obligation of
banning upon non-performance of the contract cannot seek to
challenge the same on the ground that the pricniples of natural
justice are not observed. In my humble submission, the principles
of natural justice cannot be put into the straight jacket formula
so as to uniformly apply to all category of cases irrespective of
the prejudice caused to the concerned party. Further even if any
prejudice is caused to the party, the same cannot be challenged
once the party has agreed under the terms and conditions of the
contract for such consequences. The petitioner was given a
reasonable and fair opportunity to explain its case before the
impugned decision was taken and thus, the impugned order does
not require any intervention of this Hon'ble Court. I humbly
state that the petitioner company with a view to secure the
subject tender has quoted the price as mentioned in the price bid
format as well as the Appendix 9. Abare perusal of the price bid
format and Appendix 9 clearly shows that the price was to be
quoted for 7 workstations and therefore, the question of
ambiguity as sought to be canvassed by the petitioners does not
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
arise.
5.7 I deny that the impugned order is contrary to the
integrated Materials Management Mannual ('the Manual' for
short) which prescribes the provisions with regard to banning of
a contractor as alleged or otherwise. I deny that the respondent
could not have imposed penalty of banning the petitioner
company in the instant case as alleged or otherwise. I deny that
the impugned order is abritrary, suffering from vice of colourable
exercise of power, in breach of principles of natural justice, in
breach of Article 14 of the Constitution of India as alleged or
otherwise.
5.8 I humbly state that clause 17.5.1 of the manual deals
with removal of vendor from an 'approved list of vendors'. I
humbly state that as per the provisions of the Manual there are
vendors who are empanelled and put on the approved list after
considering their financial capability, technical capability, quality
and delivery performance. A vendor to become part of the
approved list needs to have prove delivery quality, execution
experience etc. After becoming part of the approved list a vendor
acquires qualification to be shortlisted for notice inviting tenders
which may not be available to the vendors at large in the open
market as the vendors on the approved list are prequalified for
the specific work. Clause 17.5.1 of the manual deals with the
removal of a vendor from the approved list which results into
greater loss to the vendor inasmuch as there may be several
opportunities to participate in notice inviting tenders which are
available only to vendors appearing in the approved list. I
humbly state that the petitioner company is not on the approved
list of the vendors. Hence, clause 17.5.1 is not applicable in the
instant case. I humbly state that the petitioner company has been
banned / put on holiday as per clause 41 of the subject tender
(@ pg.105 of the captioned petition) and clause 17.5.2(n) of the
manual. For ready reference clause 17.5.2(n) has been reproduced
hereunder:-
"n. The guidelines on suspension of business dealing with
a firm as per clause 17.5.2-a above shall be applicable in
case of termination of contract due to unsatisfactory
performance, insolvency of the firm, delay in mobilization,
and/or annulment of the contract due to non-submission of
Performance Security provided the related provisions have
been incorporated in the tender/ contract conditions."
I humbly state that clause 17.5.2(a) states that in case, it is
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
decided to suspend business dealing with the defaulting supplier/
contractor, the Key Executive at the Work Centre shall submit
the case to the concerned Director for approval for initiating
banning process against the erring firm. The concerned Key
Executive while submitting the case to the concerned Director for
initiating banning process against the erring firm shall also
nominate an Enquiry Officer and obtain approval of the
concerned Director. In the present case, the respondent
corporation has complied with the necessary formalities as
enumerated in the manual and the banning order has been
passed after affording fair and reasonable opportunity to the
petitioner company.
10. Mr. Naik would submit that the allegations levelled by the
writ-applicants that he was presurrized by the Corporation to
perform the contract in the quoted price of single unit, are
absolutely false and baseless. He would submit that appropriate
opportunity was given to the writ-applicants by the Inquiry Officer
before taking the final decision to pass the order of blacklisting. He
would argue that as the writ-applicant declined to perform the
contract and execute the NOA, the Corporation was left with no
other option, but to initiate the banning proceedings in accordance
with the clause-33 of the tender following the procedure as
prescribed under the manual.
11. Mr. Naik pointed out that the price quoted by the writ-
applicants, if multiplied by seven comes to around Rs.65,11,653.45,
whereas, the price quoted by the other two bidders namely M/s.
Cynus Information Solutions Pvt. Ltd. is Rs.64,78,290/- and one
M/s. Dotcad Pvt. Ltd. is Rs.61,66,650/-. According to Mr. Naik, a
bare perusal of the prices quoted by the other two bidders would
indicate that the price quoted by the writ-applicants multiplied by
seven is still much higher than the other two bidders. In the last,
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
Mr. Naik submitted that the impugned action in no manner could
be termed as arbitrary or smacking of any malafide. In such
circumstances referred to above, Mr. Naik prays that there being no
merit in the present writ-application, the same be rejected.
ANALYSIS:-
12. Having heard the learned counsel appearing for the parties
and having gone through the materials on record, the only question
that falls for our consideration is whether the impugned order of
blacklisting is sustainable in law.
13. In Black's Law Dictionary, the meaning of the term "blacklist"
is given as follows:
"Blacklist: A list of persons marked out for special avoidance,
antagonism, or enmity on the part of those who prepare the list
or those among whom it is intended to circulate;
Blacklist is a list of people, who are considered by a particular
authority or group to be unacceptable and who should be
avoided and not trusted. 'Blacklisting' has the effect of
preventing a person from the privilege and advantage of entering
into lawful relationship with the Government for purposes of
gains. The fact that a disability is created by the order of
blacklisting indicates that the relevant authority is to have an
objective satisfaction. Fundamentals of fair play require that the
person concerned should be given an opportunity to represent his
case before he is put on the blacklist."
14. We must first look into the position of law on the subject.
The law on the subject has been succinctly explained by the
Supreme Court in the case of M/s. Kulja Industries Limited Vs.
Chief General Manager, W.T. Proj., BSNL and others. reported in
AIR 2014 SC 9. The Supreme Court in the said case first considered
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
Paras-31 and 32 of the bid document, which provided the power to
blacklist a defaulting contractor. In the case on hand, it is Clause-
33.0 of the bid document referred to above. In this regard, we first
quote the Paras-14 and 15 respectively of the judgment.
14. We may at the outset deal with the contention whether
paras 31 and 32 of the bid document to which Mr. Rohtagi has
made reference is the only source of the power to blacklist a
defaulting contractor. These paras are as under:
"31. Purchaser reserves the right to disqualify the supplier
for a suitable period who habitually failed to supply the
equipment in time. Further, the suppliers whose equipment
do not perform satisfactory in the field in accordance with
the specifications may also be disqualified for a suitable
period as decided by the purchaser.
32. Purchaser reserves the right to blacklist a bidder for a
suitable period in case he fails to honour his bid without
sufficient grounds."
15. A plain reading of the above would show that BSNL, the
purchaser has reserved the right to disqualify any supplier who
(a) habitually fails to supply the equipment in time or
(b) the equipment supplied by the supplier does not perform
satisfactory in the field in accordance with the specifications or
(c) fails to honour his bid without sufficient grounds.
15. From the aforesaid, it is evident that the B.S.N.L. had
reserved its right to blacklist a bidder for a suitable period only in
three situations as referred to in Para-14. In the case on hand, such
power under Clause-33.0 could be exercised in two contingencies -
(1) in case of cancellation of the purchase order on account of
delay in execution of the order or non-execution of the order
and/or annulment of the award due to non-submission of the
performance security; and (2) failure to honour the commitments
under "warantee and guarantee" requirements. The Supreme Court,
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
thereafter, proceeded to explain in Para-17 how the power to
blacklist the contractor should be exercised. The Supreme Court has
observed that such power is inherent in the party allotting the
contract. There need not to be any specific conferment of such
power by statute or reserved by contractor. We quote Para-17
which reads as under:-
"17. That apart the power to blacklist a contractor whether the
contract be for supply of material or equipment or for the
execution of any other work whatsoever is in our opinion
inherent in the party allotting the contract. There is no need for
any such power being specifically conferred by statute or
reserved by contractor. That is because 'blacklisting' simply
signifies a business decision by which the party affected by the
breach decides not to enter into any contractual relationship with
the party committing the breach. Between two private parties the
right to take any such decision is absolute and untrammelled by
any constraints whatsoever. The freedom to contract or not to
contract is unqualified in the case of private parties. But any
such decision is subject to judicial review when the same is
taken by the State or any of its instrumentalities. This implies
that any such decision will be open to scrutiny not only on the
touchstone of the principles of natural justice but also on the
doctrine of proportionality. A fair hearing to the party being
blacklisted thus becomes an essential pre-condition for a proper
exercise of the power and a valid order of blacklisting made
pursuant thereto. The order itself being reasonable, fair and
proportionate to the gravity of the offence is similarly examinable
by a writ Court. The legal position on the subject is settled by a
long line of decisions rendered by this Court starting with
Erusian Equipment & Chemicals Ltd. v. State of West Bengal and
Anr. (1975) 1 SCC 70 where this Court declared that blacklisting
has the effect of preventing a person from entering into lawful
relationship with the Government for purposes of gains and that
the Authority passing any such order was required to give a fair
hearing before passing an order blacklisting a certain entity. This
Court observed:
"20. Blacklisting has the effect of preventing a person from
the privilege and advantage of entering into lawful
relationship with the Government for purposes of gains. The
fact that a disability is created by the order of blacklisting
indicates that the relevant authority is to have an objective
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
satisfaction. Fundamentals of fair play require that the
person concerned should be given an opportunity to
represent his case before he is put on the blacklist."
16. In Paras-18, 19 and 20 respectively, the Supreme Court
considered few of its earlier decisions and also, the legal position
governing blacklisting of the suppliers in the U.S.A. and U.K. We
quote the same as under:-
18. Subsequent decisions of this Court in M/s Southern Painters
v. Fertilizers & Chemicals Travancore Ltd. and Anr. AIR 1994 SC
1277; Patel Engineering Ltd. Union of India (2012) 11 SCC 257;
B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. & Ors. (2006)
11 SCC 548; Joseph Vilangandan v. The Executive Engineer,
(PWD) Ernakulam & Ors. (1978) 3 SCC 36 among others have
followed the ratio of that decision and applied the principle of
audi alteram partem to the process that may eventually culminate
in the blacklisting of a contractor.
19. Even the second facet of the scrutiny which the blacklisting
order must suffer is no longer res integra. The decisions of this
Court in Radha krishna Agarwal and Ors. v. State of Bihar &
Ors. (1977) 3 SCC 457; E.P. Royappa v. State of Tamil Nadu and
Anr. (1974) 4 SCC 3; Maneka Gandhi v. Union of India and Anr.
(1978) 1 SCC 248; Ajay Hasia and Ors. v. Khalid Mujib
Sehravardi and Ors., (1981) 1 SCC 722; R.D. Shetty v.
International Airport Authority of India and Ors., (1979) 3 SCC
489 and Dwarkadas Marfatia and sons v. Board of Trustees of the
Port of Bombay (1989) 3 SCC 751 have ruled against arbitrariness
and discrimination in every matter that is subject to judicial
review before a Writ Court exercising powers under Article 226
or Article 32 of the Constitution. It is also well settled that even
though the right of the writ petitioner is in the nature of a
contractual right, the manner, the method and the motive behind
the decision of the authority whether or not to enter into a
contract is subject to judicial review on the touchstone of
fairness, relevance, natural justice, non-discrimination, equality
and proportionality. All these considerations that go to determine
whether the action is sustainable in law have been sanctified by
judicial pronouncements of this Court and are of seminal
importance in a system that is committed to the rule of law. We
do not consider it necessary to burden this judgment by a
copious reference to the decisions on the subject. A reference to
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
the following passage from the decision of this Court in M/s
Mahabir Auto Stores & Ors. v. Indian Oil Corporation Ltd.,
(1990) 3 SCC 752 should, in our view, suffice:
"11. It is well settled that every action of the State or an
instrumentality of the State in exercise of its executive
power, must be informed by reason. In appropriate cases,
actions uninformed by reason may be questioned as
arbitrary in proceedings under Article 226 or Article 32 of
the Constitution. Reliance in this connection may be placed
on the observations of this Court in Miss Radha Krishna
Agarwal and Ors. v. State of Bihar and Ors., [1977] 3 SCR
249 ...... In case any right conferred on the citizens which
is sought to be interfered, such action is subject to Article
14 of the Constitution, and must be reasonable and can be
taken only upon lawful and relevant grounds of public
interest. Where there is arbitrariness in State action of this
type of entering or not entering into contracts, Article 14
springs up and judicial review strikes such an action down.
Every action of the State executive authority must be
subject to rule of law and must be informed by reason. So,
whatever be the activity of the public authority, in such
monopoly or semi-monopoly dealings, it should meet the
test of Article 14 of the Constitution. If a Governmental
action even in the matters of entering or not entering into
contracts, fails to satisfy the test of reasonableness, the
same would be unreasonable....... It appears to us that rule
of reason and rule against arbitrariness and discrimination,
rules of fair play and natural justice are part of the rule of
law applicable in situation or action by State instrumentality
in dealing with citizens in a situation like the present one.
Even though the rights of the citizens are in the nature of
contractual rights, the manner, the method and motive of a
decision of entering or not entering into a contract, are
subject to judicial review on the touchstone of relevance
and reasonableness, fair play, natural justice, equality and
non-discrimination in the type of the transactions and nature
of the dealing as in the present case."
20. 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
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
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;
(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) xxxx
(d) Any other cause of so serious or compelling a nature that
it affects your present responsibility.
17. In Para-21, the Supreme Court has provided guidelines that
may influence the decision of the authority concerned. We quote
Para-21 as under:-
21. The guidelines also stipulate the factors that may influence
the debarring official's decision which include the following:
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
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.
(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."
18. The Supreme Court in the case of VET India Pharamaceuticals
Limited Vs. State of Uttar Pradesh & Another reported in (2021) 1
SCC 804 observed that an order of blacklisting operates to the
prejudice of a commercial person not only "in praesenti", but also
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
puts a taint, which attaches far beyond and may well spell the
death knell of the organisation/institution for all times to come
described as a civil death.
19. Such observations of the Supreme Court would fairly describe
the effect of the impugned order on the writ-applicant. The
Supreme Court in M/s. Kulja Industries Limited (Supra) has made it
explicitly clear that although the authority to blacklist the
contractor or the power to blacklist the contractor is inherent in the
party allotting the contract, yet such decision is subject to the
judicial review when the same is taken by the State or any of its
instrumentalities. It necessarily implies that any such decision would
be open to scrutiny not only on the touchstone of the principles of
natural justice, but also on the doctrine of proportionality.
20. The concept of Blacklisting has also been explained by the
Supreme Court in M/s. Erusian Equipment & Chemicals Limited v.
Union of India and others,(1975) 1 SCC 70, as under:
"Blacklisting has the effect of preventing a person from the
privilege and advantage of entering into lawful relationship with
the Government for purposes of gains."
21. We may also look into an order passed by the Supreme Court
in the case of M/s. Patel Engineering Limited Vs. Union of India &
Anr.; Special Leave Petition (C) No.23059 of 2011 ; decided on
11.05.2012. We quote relevant observations:-
"The nature of the authority of State to blacklist persons was
considered by this Court in the abovementioned case [1] and took
note of the constitutional provision (Article 298) [2], which
authorises both the Union of India and the States to make
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
contracts for any purpose and to carry on any trade or business.
It also authorises the acquisition, holding and disposal of
property. This Court also took note of the fact that the right to
make a contract includes the right not to make a contract. By
definition, the said right is inherent in every person capable of
entering into a contract. However, such a right either to enter or
not to enter into a contract with any person is subject to a
constitutional obligation to obey the command of Article 14.
Though nobody has any right to compel State to enter into a
contract, everybody has a right to be treated equally when State
seeks to establish contractual relationships [3]. The effect of
excluding a person from entering into a contractual relationship
with State would be to deprive such person to be treated equally
with those, who are also engaged in similar activity.
It follows from the above Judgment that the decision of
State or its instrumentalities not to deal with certain persons or
class of persons on account of the undesirability of entering into
contractual relationship with such persons is called blacklisting.
State can decline to enter into a contractual relationship with a
person or a class of persons for a legitimate purpose. The
authority of State to blacklist a person is a necessary concomitant
to the executive power of the State to carry on the trade or the
business and making of contracts for any purpose, etc. There
need not be any statutory grant of such power. The only legal
limitation upon the exercise of such an authority is that State is
to act fairly and rationally without in any way being arbitrary -
thereby such a decision can be taken for some legitimate
purpose. What is the legitimate purpose that is sought to be
achieved by the State in a given case can vary depending upon
various factors."
22. It has been argued on behalf of the Corporation that the
principles of natural justice have been fully complied with as a
show-cause notice was issued to the writ-applicants and therefore
an opportunity could be said to have been given to the writ-
applicants to put forward their case before the final decision was
taken. However, we need to address ourselves on the doctrine of
proportionality as also the contents of the show-cause notice. In
other words, whether the facts and circumstances of the present
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
case warantted any action on the part of the Corporation invoking
Condition No.33.0 of the bid document and what exactly has been
imputed in the show-cause notice.
DOCTRINE OF PROPORTIONALITY:-
23. The question whether a punitive measure is disproportionate
must also be viewed in the context of the standards set by the
Corporation themselves. It is well settled that the High Court while
exercising power of judicial review would be reluctant to substitute
its own opinion on the quantum of penalty or punishment imposed.
However, if the High Court finds the punishment as imposed
shockingly disporpotionate the interference with the same would be
warranted. The Supreme Court in M/s. Kulja Industries Limited
(Supra) considered a situation where a contractor had fradulently
withdrawn a large sums of money in collusion with the officials of
the B.S.N.L. On the same being discovered the Contractor had been
blacklisted. Such are not the nature of the allegations in the present
case.
24. Having regard to the quick development of administrative law
and the need to control the misuse of discretion granted to the
exercising authority, the courts have evolved various doctrines and
principles that enable them to interfere in an administrative
discretion when it is found or noticed to be irrational, unreasonable
or entails abuse of power. One such principle is the 'Doctrine of
proportionality'. The doctrine of proportionality entails that an
administrative decision, which is taken through the exercise of
discretionary powers, must be in the extent to the consequences
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
that follow from implementing such decisions.
25. The 'Doctrine of proportionality' is a European origin. It is
imbibed in the 'European Droit Administratif' and is one of the
most important legal principles in the 'European Administrative
Law'. In Britain, the 'Principle of Proportionality' has, for so long,
been treated as a part of the Wednesbury's principle 2 of
unreasonableness which postulated the basic standard of
reasonableness that ought to be followed by a public body in its
decisions. It stated that if a choice is so unreasonable to the point
that no sensible expert could ever take those actions or employ the
methods adopted, then such activities are subject to be liable and
quashed through judicial review.
26. Although the 'Doctrine of Proportionality' has been dealt with
as a part of the Wednesbury's principle, the Courts have adopted a
different position when it comes to the judicial intervention in
terms of judicial review. It has been held that the principle entails
the reasonableness test with a heightened scrutiny. 3 In other words,
to apply this doctrine, not only the decisions have to be within the
limits of reasonableness, but only, there has to be a balance
between the advantage and disadvantage in the outcome that has
been achieved through the administrative action. 4 Therefore, the
extent of judicial review is more intense and greater on account of
'proportionality' test than the 'reasonableness' test. Furthermore,
the court while applying the rule of proportionality will think about
the public and individual interest in the matter which is not done
while applying the Wednesbury's principle of unreasonableness.
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
27. In Gohil Vishvaraj Hanubhai and Ors. v. State of Gujarat and
Ors [(2017)13 SCC 621], it is held in paragraphs 24 to 27 thus:
24. We are left with the third question--whether the magnitude
of the impugned action is so disproportionate to the mischief
sought to be addressed by the respondents that the cancellation
of the entire examination process affecting lakhs of candidates
cannot be justified on the basis of the doctrine of proportionality.
25. The doctrine of proportionality, its origin and its application
both in the context of legislative and administrative action was
considered in some detail by this Court in Om Kumar and Ors.
v.Union of India, (2001) 2 SCC 386 : 2001 SCC (L&S) 1039]. This
Court drew a distinction between administrative action which
affects fundamental freedoms [See: Om Kumar v.Union of India,
(2001) 2 SCC 386 at pp. 407-08, paras 52 to 54 : 2001 SCC
(L&S) 1039] under Articles 19(1) and 21 and administrative action
which is violative of Article 14 of the Constitution of India. This
Court held that in the context of the violation of fundamental
freedoms: (Om Kumar case [See: Om Kumar v.Union of India,
(2001) 2 SCC 386 at pp. 407-08, paras 52 to 54 : 2001 SCC
(L&S) 1039] , SCC p. 408, para 54)
"54. ... the proportionality of administrative action affecting
the freedoms under Article 19(1) or Article 21 has been
tested by the courts as a primary reviewing authority and
not on the basis of Wednesbury [Associated Provincial
Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223
(CA)] principles. It may be that the courts did not call this
proportionality but it really was."
This Court, thereafter took note of the fact that the Supreme
Court of Israel recognised proportionality as a separate ground in
administrative law to be different from unreasonableness.
26. It is nobody's case before us that the impugned action is
violative of any of the fundamental freedoms of the appellants.
We are called upon to examine the proportionality of the
administrative action only on the ground of violation of Article
14. It is therefore necessary to examine the principles laid down
by this Court in this regard.
27. This Court posed the question inOm Kumar case[Om Kumar
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
v.Union of India, (2001) 2 SCC 386 : 2001 SCC (L&S) 1039] :
(SCC p. 409, para 61)
"61. When does the court apply, under Article 14, the
proportionality test as a primary reviewing authority and
when does the court apply theWednesbury[Associated
Provincial Picture Houses Ltd.v.Wednesbury Corpn., (1948) 1
KB 223 (CA)] rule as a secondary reviewing authority? From
the earlier review of basic principles, the answer becomes
simple. In fact, we have further guidance in this behalf."
and concluded: (SCC pp. 410-11, paras 66-68)
"66. It is clear from the above discussion that in India
where administrative action is challenged under Article 14
as being discriminatory, equals are treated unequally or
unequals are treated equally, the question is for the
constitutional courts as primary reviewing courts to consider
correctness of the level of discrimination applied and
whether it is excessive and whether it has a nexus with the
objective intended to be achieved by the administrator. Here
the court deals with the merits of the balancing action of
the administrator and is, in essence, applying
"proportionality" and is a primary reviewing authority.
67. But where an administrative action is challenged as
"arbitrary" under Article 14 on the basis of E.P. Royappa
v.State of T.N.[E.P. Royappa v.State of T.N., (1974) 4 SCC 3
: 1974 SCC (L&S) 165] (as in cases where punishments in
disciplinary cases are challenged), the question will be
whether the administrative order is "rational" or
"reasonable" and the test then is the Wednesbury
[Associated Provincial Picture Houses Ltd. v. Wednesbury
Corpn., (1948) 1 KB 223 (CA)] test. The courts would then
be confined only to a secondary role and will only have to
see whether the administrator has done well in his primary
role, whether he has acted illegally or has omitted relevant
factors from consideration or has taken irrelevant factors
into consideration or whether his view is one which no
reasonable person could have taken. If his action does not
satisfy these rules, it is to be treated as arbitrary. [In G.B.
Mahajan v.Jalgaon Municipal Council[G.B. Mahajan v.
Jalgaon Municipal Council,(1991) 3 SCC 91] (SCC at p.
111).]
Venkatachaliah, J. (as he then was) pointed out that
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
"reasonableness" of the administrator under Article 14 in the
context of administrative law has to be judged from the
standpoint of Wednesbury [Associated Provincial Picture
Houses Ltd.v.Wednesbury Corpn., (1948) 1 KB 223 (CA)]
rules.
In Tata Cellular v.Union of India [Tata Cellular v.Union of
India, (1994) 6 SCC 651] (SCC at pp. 679-80), Indian
Express Newspapers (Bombay) (P) Ltd.v.Union of India
[Indian Express Newspapers (Bombay) (P) Ltd.v.Union of
India, (1985) 1 SCC 641 : 1985 SCC (Tax) 121] (SCC at pp.
691), Supreme Court Employees' Welfare Assn. v. Union of
India [Supreme Court Employees' Welfare Assn.v.Union of
India, (1989) 4 SCC 187 : 1989 SCC (L&S) 569] (SCC at p.
241) andU.P. Financial Corpn.v.Gem Cap (India) (P) Ltd.
[U.P. Financial Corpn.v.Gem Cap (India) (P) Ltd., (1993) 2
SCC 299] (SCC at p. 307), while judging whether the
administrative action is "arbitrary" under Article 14 (i.e.
otherwise then being discriminatory), this Court has
confined itself to a Wednesbury [Associated Provincial
Picture Houses Ltd.v.Wednesbury Corpn., (1948) 1 KB 223
(CA)] review always.
68. Thus, when administrative action is attacked as
discriminatory under Article 14, the principle of primary
review is for the courts by applying proportionality.
However, where administrative action is questioned as
"arbitrary" under Article 14, the principle of secondary
review based onWednesbury [Associated Provincial Picture
Houses Ltd.v.Wednesbury Corpn., (1948) 1 KB 223 (CA)]
principles applies."
28. In Modern Dental College and Research Centre Vs. State of
M.P [(2016)7 SCC 353], it is held in paragraphs 63 to 65 thus:
"63. In this direction, the next question that arises is as to what
criteria is to be adopted for a proper balance between the two
facets viz. the rights and limitations imposed upon it by a
statute. Here comes the concept of "proportionality", which is a
proper criterion. To put it pithily, when a law limits a
constitutional right, such a limitation is constitutional if it is
proportional. The law imposing restrictions will be treated as
proportional if it is meant to achieve a proper purpose, and if
the measures taken to achieve such a purpose are rationally
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
connected to the purpose, and such measures are necessary. This
essence of doctrine of proportionality is beautifully captured by
Dickson, C.J. of Canada in R.v.Oakes[R.v.Oakes, (1986) 1 SCR
103 (Can SC)] , in the following words (at p. 138):
"To establish that a limit is reasonable and demonstrably justified
in a free and democratic society, two central criteria must be
satisfied. First, the objective, which the measures, responsible for
a limit on a Charter right or freedom are designed to serve, must
be "of" sufficient importance to warrant overriding a
constitutional protected right or freedom ... Second... the party
invoking Section 1 must show that the means chosen are
reasonable and demonstrably justified. This involves "a form of
proportionality test..." Although the nature of the proportionality
test will vary depending on the circumstances, in each case
courts will be required to balance the interests of society with
those of individuals and groups. There are, in my view, three
important components of a proportionality test. First, the
measures adopted must be.... rationally connected to the
objective. Second, the means ... should impair "as little as
possible" the right or freedom in question ... Third, there must
be a proportionality between the effects of the measures which
are responsible for limiting the Charter right or freedom, and the
objective which has been identified as of "sufficient importance".
The more severe the deleterious effects of a measure, the more
important the objective must be if the measure is to be
reasonable and demonstrably justified in a free and democratic
society."
64. The exercise which, therefore, is to be taken is to find out as
to whether the limitation of constitutional rights is for a purpose
that is reasonable and necessary in a democratic society and such
an exercise involves the weighing up of competitive values, and
ultimately an assessment based on proportionality i.e. balancing
of different interests.
65. We may unhesitatingly remark that this doctrine of
proportionality, explained hereinabove in brief, is enshrined in
Article 19 itself when we read clause (1) along with clause (6)
thereof. While defining as to what constitutes a reasonable
restriction, this Court in a plethora of judgments has held that
the expression "reasonable restriction" seeks to strike a balance
between the freedom guaranteed by any of the sub-clauses of
clause (1) of Article 19 and the social control permitted by any
of the clauses (2) to (6). It is held that the expression
"reasonable" connotes that the limitation imposed on a person in
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the enjoyment of the right should not be arbitrary or of an
excessive nature beyond what is required in the interests of
public. Further, in order to be reasonable, the restriction must
have a reasonable relation to the object which the legislation
seeks to achieve, and must not go in excess of that object
(seeP.P. Enterprisesv.Union of India[P.P. Enterprisesv.Union of
India, (1982) 2 SCC 33 : 1982 SCC (Cri) 341]). At the same time,
reasonableness of a restriction has to be determined in an
objective manner and from the standpoint of the interests of the
general public and not from the point of view of the persons
upon whom the restrictions are imposed or upon abstract
considerations (see Mohd. Hanif Quareshiv.State of Bihar[Mohd.
Hanif Quareshiv.State of Bihar, AIR 1958 SC 731 : 1959 SCR
629]). InM.R.F. Ltd.v.State of Kerala[M.R.F. Ltd.v.State of Kerala,
(1998) 8 SCC 227 : 1999 SCC (L&S) 1] , this Court held that in
examining the reasonableness of a statutory provision one has to
keep in mind the following factors:
(1) The directive principles of State policy.
(2) Restrictions must not be arbitrary or of an excessive nature so
as to go beyond the requirement of the interest of the general
public.
(3) In order to judge the reasonableness of the restrictions, no
abstract or general pattern or a fixed principle can be laid
down so as to be of universal application and the same will
vary from case to case as also with regard to changing
conditions, values of human life, social philosophy of the
Constitution, prevailing conditions and the surrounding
circumstances.
(4) A just balance has to be struck between the restrictions
imposed and the social control envisaged by Article 19(6).
(5) Prevailing social values as also social needs which are
intended to be satisfied by the restrictions. (6) There must be
a direct and proximate nexus or reasonable connection
between the restrictions imposed and the object sought to be
achieved. If there is a direct nexus between the restrictions,
and the object of the Act, then a strong presumption in favour
of the constitutionality of the Act will naturally arise."
29. So much so, the principle was considered by the House of
Lords in R v Secretary of State for the Home Department, ex parte
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
Daly [(2001) 3 All ER 433]. Paragraphs 26 to 28 reads thus:
26. The explanation of the Master of the Rolls in the first
sentence of the cited passage requires clarification. It is couched
in language reminiscent of the traditional Wednesbury ground of
review (Associated Provincial Picture Houses Ltd v Wednesbury
Corporation[1948] 1 KB 223), and in particular the adaptation of
that test in terms of heightened scrutiny in cases involving
fundamental rights as formulated in R v Ministry of Defence, Ex
p Smith [1996] QB 517, 554E-G per Sir Thomas Bingham MR.
There is a material difference between the Wednesbury and
Smith grounds of review and the approach of proportionality
applicable in respect of review where convention rights are at
stake.
27. The contours of the principle of proportionality are familiar.
In de Freitas v. Permanent Secretary of Ministry of Agriculture,
Fisheries, Lands and Housing [1999] 1 AC 69 the Privy Council
adopted a three stage test. Lord Clyde observed, at p 80, that in
determining whether a limitation (by an act, rule or decision) is
arbitrary or excessive the court should ask itself:
"whether: (i) the legislative objective is sufficiently important to
justify limiting a fundamental right; (ii) the measures designed to
meet the legislative objective are rationally connected to it; and
(iii) the means used to impair the right or freedom are no more
than is necessary to accomplish the objective."
Clearly, these criteria are more precise and more sophisticated
than the traditional grounds of review. What is the difference for
the disposal of concrete cases? Academic public lawyers have in
remarkably similar terms elucidated the difference between the
traditional grounds of review and the proportionality approach:
see Professor Jeffrey Jowell QC,"Beyond the Rule of Law:
Towards Constitutional Judicial Review" [2000] PL 671; Craig,
Administrative Law, 4th ed(1999),561-563;Professor David
Feldman,"Proportionality and the Human Rights Act 1998",essay
inThe Principle of Proportionality in the Laws of Europe(1999),
pp 117, 127 et seq.The starting point is that there is an overlap
between the traditional grounds of review and the approach of
proportionality. Most cases would be decided in the same way
whichever approach is adopted. But the intensity of review is
somewhat greater under the proportionality approach. Making
due allowance for important structural differences between
various convention rights, which I do not propose to discuss, a
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few generalisations are perhaps permissible. I would mention
three concrete differences without suggesting that my statement is
exhaustive. First, the doctrine of 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. Secondly, the 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. Thirdly, even the
heightened scrutiny test developed in R v Ministry of Defence, Ex
p Smith [1996] QB 517, 554 is not necessarily appropriate to the
protection of human rights. It will be recalled that in Smith the
Court of Appeal reluctantly felt compelled to reject a limitation
on homosexuals in the army. The challenge based on article 8 of
the Convention for the Protection of Human Rights and
Fundamental Freedoms (the right to respect for private and
family life) foundered on the threshold required even by the
anxious scrutiny test. The European Court of Human Rights came
to the opposite conclusion:Smith and Grady v United Kingdom
(1999) 29 EHRR 493. The court concluded, at p 543, para 138:
"the threshold at which the High Court and the Court of Appeal
could find the Ministry of Defence policy irrational was placed so
high that it effectively excluded any consideration by the
domestic courts of the question of whether the interference with
the applicants' rights answered a pressing social need or was
proportionate to the national security and public order aims
pursued, principles which lie at the heart of the court's analysis
of complaints under article 8 of the Convention." In other words,
the intensity of the review, in similar cases, is guaranteed by the
twin requirements that the limitation of the right was necessary
in a democratic society, in the sense of meeting a pressing social
need, and the question whether the interference was really
proportionate to the legitimate aim being pursued.
28. The differences in approach between the traditional grounds
of review and the proportionality approach may therefore
sometimes yield different results. It is therefore important that
cases involving convention rights must be analysed in the correct
way. This does not mean that there has been a shift to merits
review. On the contrary, as Professor Jowell [2000] PL 671, 681
has pointed out the respective roles of judges and administrators
are fundamentally distinct and will remain so. To this extent the
general tenor of the observations in Mahmood [2001] 1 WLR 840
are correct. And Laws LJ rightly emphasised in Mahmood,at p
847, para 18, "that the intensity of review in a public law case
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
will depend on the subject matter in hand". That is so even in
cases involving Convention rights. In law context is everything."
30. Bearing the aforesaid principle of law, we now proceed to
consider what did the writ-applicant exactly do that prompted the
Corporation to invoke condition no.33 and pass an order of
blacklisting.
31. It appears from the materials on record that the tender in
question was in the form of two bid system i.e. Technical and
Commercial. It further appears that while uploading the technical
bid, the writ-applicants took notice of two forms - (1) Price Bid in
Excel Format; and (2) One Form under the Item Conditions clause
on the ONGC E-Tender portal. In the Price Bid (i.e. Excel Version),
the base price element was mentioned, but according to the writ-
applicants, there was no clarity as regards the fact, whether to
quote the basic price of a Single unit or the basic price of Seven
(7) units. The writ-applicants mentioned the basic price of a Single
Unit and for the purpose of clarity mentioned the Price Per Unit on
the ONGC E-Tender portal. The same was part of the bid and the
bidding process. After the bid offerred by the writ-applicants came
to be technically accepted by the ONGC, they were called for the
commercial bid opening and during the price-bid opening, the writ-
applicants conveyed to the authority concerned that the quoted
rates were unit rate. The writ-applicants also pointed out on the
ONGC E-Tender portal.
32. The aforesaid created confusion. It is not in dispute that both
the sides deliberated on the issue on 05.12.2019 as regards the
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
confusion. The TC proposed that the representation of the writ-
applicants did not merit any consideration and no change in the
NOA should be made. Such circmstance was duly approved by the
CPA. In such circumstances, the writ-applicants informed the ONGC
that they would not be in a position to execute the NOA at the
price of Rs.9,30,223=35 [Rupees Nine Lac Thirty Thousand Two
Hundred Twenty Three & Thirty Five Paisa Only] . This appears to
have been taken by the ONGC as an affront. The ONGC thought fit
to initiate inquiry and terminated the contract. It also thought fit to
put the writ-applicants in the holiday-list [blacklisting].
33. Having regard to the aforesaid, could it be said that the
conduct of the writ-applicants was lacking transparency and
discipline, leading to suppression of a material aspect and thereby
indulging themselves in some immoral activities disabling the
authority to take a decision applying the principles of fair play and
justice.
34. There may be circumstances in which one of the conracting
parties may be justified in backing out the other. There could be
unforeseen circumstances/Supervening circumstances/several other
situations, which the contracting parties may not be able to
comprehend and the ground realities may be found otherwise than
what was meant and understood by the contracting parties. There
may be mutual mistake or mistake on the side of one party on the
basis of some wrong understanding of the ground realities. In our
opinion, no such circumstances exists in the case on hand justifying
an order of blacklisting.
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
35. The most important aspect and perhaps the last aspect, we
need to now look into and address is whether anything of what we
have stated in Paragraph-33 above has been imputed or alleged in
the show-cause notice, which was issued to the writ-applicant dated
17.07.2020. The answer is in the negative.
36. We once-again look into the Paragraph-6 of the show-cause
notice which reads as under:-
"6. In light of above mentioned, ONGC has initiated inquiry against
M/s. Silver Touch Technologies Ltd. and undersigned has been
appointed as the inquiry officer.
"(In case of cancellation of the purchase order(s) on account of
delay in execution of the order or non-execution of the order and/
or annulment of the award due to non-submission of Performance
Security or failure to honour the commitments under 'Warranty &
Guarantee' requirements following actions shall be taken against
the Supplier.
i) ONGC shall conduct an inquriry against the Supplier and
consequent to the conclusion of the inquiry, if it is found that the
fault is on the part of the Supplier, then they shall be put on
holiday [i.e. neither any tender enquiry will be issued to such a
supplier by ONGC against any type of tender nor their offer will
be considered by ONGC against any ongoing tender(s) where
contract between ONGC and that particular Contractor (as a
bidder) has not been concluded] for a period of two years from
the date the order for putting the Contractor on holidy is issued.
However, the action taken by ONGC for putting that Supplier on
holiday shall not have any effect on other ongoing PO(s), if any
with that Supplier which shall continue till expiry of their term(s).
ii) Pending completion of the enquiry process for putting the
Supplier on holiday, ONGC shall neither issue any tender enquiry
to the defaulting Supplier nor shall consider their offer in any
ongoing tender.)"
37. Thus, it appears that the Corporation thought fit to invoke
the Clause of "warranty and guarantee" and decided to take the
necessary action to blacklist the writ-applicants. The aforesaid may
C/SCA/5434/2021 JUDGMENT DATED: 26/08/2021
empower the Corporation, however, we of the view that mere delay
in execution of the order or non-execution of the order without
anything more by itself may not be sufficient to entail the
consequences of being blacklisted. Even in a case of delay in
execution of the order or non-execution of the order or failure to
honour the commitments, the Corporation as a State within the
Article 12 of the Constitution is obliged to consider the
circumstances that might have led to such delay or failure. Without
considering the same, it would not be proper for the Corporation to
straightway blacklist a Contractor. We are taking such view in the
facts of the present case. Our observations should not be construed
as laying a straight-jacket formula.
38. Thus, having regard to the aforesaid discussion, we have
reached to the conclusion that the decision of the Corporation to
blacklist the writ-applciants does not appear to be just, proper or
reasonable, applying the doctrine of proportionality as discussed
above.
39. In the result, this writ-application succeeds and is hereby
allowed. The impugned order dated 23.11.2020 [Annexure-A] is
hereby quashed and set aside. The writ-application is accordingly
disposed of.
(J. B. PARDIWALA, J)
(VAIBHAVI D. NANAVATI,J)
A. B. VAGHELA
