Jharkhand High Court
M/S. Sanjay Kumar Sharma vs Bharat Coking Coal Ltd. on 9 September, 2021
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P. (C) No.2044 of 2021
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M/s. Sanjay Kumar Sharma .......... Petitioner.
-Versus-
1. Bharat Coking Coal Ltd., through its Chairman-cum-Managing
Director, having its office at Koyla Nagar, Dhanbad.
2. Director (Personnel), Bharat Coking Coal Ltd., having its office at
Koyla Nagar, Dhanbad.
3. General Manager (Civil/Welfare), Bharat Coking Coal Ltd., having
its office at Koyla Nagar, Dhanbad.
4. Area Civil Engineer, CV Area, Barakar, Dhanbad.
.......... Respondents.
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CORAM : HON'BLE MR. JUSTICE RAJESH SHANKAR
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For the Petitioner : Mr. Amritansh Vats, Advocate
For the Respondents: Mr. A. K. Mehta, Advocate
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Order No.06 Date: 09.09.2021
1. This case is taken up through video conferencing.
2. The present writ petition has been filed for quashing the letter dated
28.05.2021 bearing Ref. No.BCCL/CED/GM(C)/2021-22/120 issued
under the signature of the General Manager (Civil/Welfare), BCCL-
respondent no.3, whereby the petitioner has been debarred from
participating in future tenders of BCCL for a period of 12 months from
the date of issuance of the aforesaid letter.
3. The learned counsel for the petitioner submits that in the year 2015,
the respondent-BCCL floated a notice inviting tender on 23.06.2015,
being NIT No. BCCL/CED/TC/eNIT-13/2015-16/237, from reputed and
experienced contractors for repairing of drain in up-gradation colonies
(R.K. Colony, Project Colony, Brahmsthan Colony and CMWO Laikdih
Colony) under CV Area of BCCL (hereinafter referred as the said work).
The petitioner participated in the said tender and was declared
successful being L-1. The petitioner's claim is that the work order was
issued to it after about three years and only in the year 2018 the work
was awarded by issuing Letter of Acceptance vide Ref. No.
BCCL/CED/PC/LOA-14/2018-19 dated 16.10.2018, however, no site
plan was made available to it. It is further claimed that after allocation
of the site to the petitioner, fire bricks went out of stock in the entire
BCCL area and as such it requested the Area Civil Engineer, CV Area-
XII, Barakar, BCCL- respondent no.4 vide letter dated 20.08.2018 to
allow it to use fly ash bricks, but nothing was done. Finally, the site/
location plan was made available to the petitioner vide letter dated
07.07.2020, whereby it was instructed to start the work at the earliest.
It is further submitted that when the petitioner visited the actual
site/location, it found several major issues at the site due to which it
was not feasible for the petitioner to carry out the work, as the drains
of the colonies proposed to be constructed were under the process of
demolition because an open cast mining was started in that area. The
petitioner duly informed the said problem to the concerned authority
of the respondent-BCCL vide its representation dated 15.09.2020,
however, nothing was done to resolve the said issue. Surprisingly, vide
impugned letter dated 28.05.2021, the petitioner was debarred from
participating in future tenders of BCCL for a period of 12 months from
the date of issuance of the said letter. It is also submitted that the
impugned letter has been issued without hearing the petitioner, which
is in violation of the principles of natural justice that too without
considering any of the representations made by the petitioner. Even
no specific show cause notice was issued to the petitioner asking it to
put its defence before issuing the said letter and as such the impugned
letter of debarment is liable to be set aside. The petitioner was not at
fault for any delay in execution of the said work, since due information
with regard to difficulty being faced by it in execution of the said work
was already given to the respondents within time. The letter of
debarment involves serious civil consequences, as in effect, it casts a
slur on the reputation of the company. The BCCL being a Government
Company should have acted in conformity with the requirements of
the principles of natural justice, particularly that a person must be
permitted to represent his case before putting him on debarment. It is
further submitted that final reminder dated 31.03.2021 (Annexure-E
to the Counter Affidavit) issued by the respondent n.4 has not been
mentioned in the impugned letter of debarment, which clearly
indicates that the aforesaid letter was not served to the petitioner
before issuing the impugned letter dated 28.05.2021, hence the same
having been prepared subsequently could not have been relied upon.
4. The learned counsel for the petitioner, in support of his argument, puts
reliance on the following judgments of the Hon'ble Supreme Court:-
(i) Eurasian Equipment & Chemical Ltd. Vs. State
of West Bengal reported in (1975) 1 SCC 70;
(ii) Raghunath Thakur Vs. State of Bihar as
reported in (1989) 1 SCC 229;
(iii) Patel Engineering Ltd. Vrs. Union of India
(2012) 11 SCC 257;
(iv) Gorkha Security Services Vs. Govt. (NCT of
Delhi) reported in (2014) 9 SCC 105; and
(v) Kulja Industries Ltd. Vs. Western Telecom
Project BSNL reported in (2014) 14 SCC 731.
5. Per contra, the learned counsel for the respondents submits that the
petitioner, at the time of submission of bid, had given an undertaking
vide its letter dated 30.07.2015 that if the bid was accepted, it would
furnish performance security within 28 days of issuance of LoA and
would commence the work within 10 days of issuance of the same. In
case of failure to do so, the respondent-BCCL would without prejudice
to any other right or remedy, be at liberty to cancel the LoA/award of
work and to forfeit the earnest money and also to debar it from
participating in future tenders for a minimum period of 12 months. It
is further submitted that Clause 6.1 of the General Terms and
Conditions of the NIT is itself self-explanatory which provides that if a
contractor, without reasonable cause or valid reasons, commits default
in commencing the work within the aforesaid time limit, the Company
shall, without prejudice to any other right or remedy, be at liberty, by
giving 15 days' notice in writing to the Contractor to commence the
work, in case of failure, to forfeit the earnest money deposited by him
and to rescind the LoA of Tender/Work Order and also to debar the
contractor from taking part in future re-Tender for a minimum period
of 12 months. The petitioner failed to deposit the Performance
Security/ Additional Performance Security in spite of repeated
letters/reminders issued by the respondents. The petitioner was
provided site/location plan for the work and it was also instructed to
start the work at the earliest, however, it did not start the same. The
petitioner was served letter bearing reference no.657 dated
31.03.2021 as a last reminder to start the work within 10 days, apart
from other reminders to deposit performance security and additional
performance security. The petitioner, however, neglected to perform
its part of duty due to which the work could not be commenced. The
petitioner was given as many as 12 reminders to deposit the
performance security and additional performance security, however, it
failed to deposit the same. It was also asked to commence the work
vide letters dated 07.07.2020 and 31.03.2021, but it failed to
commence the same in spite of its declaration given vide letter dated
30.07.2015, which triggered invocation of Clauses 4.2 and 6.1 of the
general terms and conditions of the contract. It is finally submitted that
the petitioner has raised disputed question of fact, which may not be
adjudicated by this court in the writ jurisdiction.
6. Heard the learned counsel for the parties and perused the materials
available on record. The petitioner has challenged the impugned letter
of blacklisting, debarring it from participating in future tenders of the
respondent-BCCL for a period of one year.
7. Before coming to the merit of the case, it would be appropriate to refer
the judgments cited by the learned counsel for the petitioner. In the
case of Gorkha Security Services Vs. Govt. (NCT of Delhi),
reported in (2014)9 SCC 105, the Hon'ble Supreme Court, while
considering the earlier judicial pronouncements made in the cases of
Eurasian Equipment & Chemical Ltd. (Supra.), Raghunath
Thakur (Supra.) and Patel Engineering Ltd. (Supra.), has held
as under:
"Necessity of serving show-cause notice as a requisite of the principles
of natural justice
16. It is a common case of the parties that the blacklisting has to be
preceded by a show-cause notice. Law in this regard is firmly grounded
and does not even demand much amplification. The necessity of
compliance with the principles of natural justice by giving the
opportunity to the person against whom action of blacklisting is
sought to be taken has a valid and solid rationale behind it. With
blacklisting, many civil and/or evil consequences follow. It is described
as "civil death" of a person who is foisted with the order of blacklisting.
Such an order is stigmatic in nature and debars such a person from
participating in government tenders which means precluding him from
the award of government contracts.
17. Way back in the year 1975, this Court in [Erusian Equipment &
Chemicals Ltd. v. State of W.B., (1975) 1 SCC 70], highlighted the
necessity of giving an opportunity to such a person by serving a show-
cause notice thereby giving him opportunity to meet the allegations
which were in the mind of the authority contemplating blacklisting of
such a person. This is clear from the reading of paras 12 and 20 of the
said judgment. Necessitating this requirement, the Court observed
thus: (SCC pp. 74-75)
"12. Under Article 298 of the Constitution the executive power of the
Union and the State shall extend to the carrying on of any trade and to
the acquisition, holding and disposal of property and the making of
contracts for any purpose. The State can carry on executive function
by making a law or without making a law. The exercise of such powers
and functions in trade by the State is subject to Part III of the
Constitution. Article 14 speaks of equality before the law and equal
protection of the laws. Equality of opportunity should apply to matters
of public contracts. The State has the right to trade. The State has
there the duty to observe equality. An ordinary individual can choose
not to deal with any person. The Government cannot choose to exclude
persons by discrimination. The order of blacklisting has the effect of
depriving a person of equality of opportunity in the matter of public
contract. A person who is on the approved list is unable to enter into
advantageous relations with the Government because of the order of
blacklisting. A person who has been dealing with the Government in
the matter of sale and purchase of materials has a legitimate interest
or expectation. When the State acts to the prejudice of a person it has
to be supported by legality.
***
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 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."
18. Again, in Raghunath Thakur v. State of Bihar [(1989) 1 SCC 229]
the aforesaid principle was reiterated in the following manner: (SCC p.
230, para 4)
"4. Indisputably, no notice had been given to the appellant of the
proposal of blacklisting the appellant. It was contended on behalf of
the State Government that there was no requirement in the rule of
giving any prior notice before blacklisting any person. Insofar as the
contention that there is no requirement specifically of giving any
notice is concerned, the respondent is right. But it is an implied
principle of the rule of law that any order having civil consequence
should be passed only after following the principles of natural justice.
It has to be realised that blacklisting any person in respect of business
ventures has civil consequence for the future business of the person
concerned in any event. Even if the rules do not express so, it is an
elementary principle of natural justice that parties affected by any
order should have right of being heard and making representations
against the order. In that view of the matter, the last portion of the
order insofar as it directs blacklisting of the appellant in respect of
future contracts, cannot be sustained in law. In the premises, that
portion of the order directing that the appellant be placed in the
blacklist in respect of future contracts under the Collector is set aside.
So far as the cancellation of the bid of the appellant is concerned, that
is not affected. This order will, however, not prevent the State
Government or the appropriate authorities from taking any future
steps for blacklisting the appellant if the Government is so entitled to
do in accordance with law i.e. after giving the appellant due notice and
an opportunity of making representation. After hearing the appellant,
the State Government will be at liberty to pass any order in accordance
with law indicating the reasons therefor. We, however, make it quite
clear that we are not expressing any opinion on the correctness or
otherwise of the allegations made against the appellant. The appeal is
thus disposed of."
19. Recently, in [Patel Engg. Ltd. v. Union of India, (2012) 11 SCC 257]
speaking through one of us (Jasti Chelameswar, J.) this Court
emphatically reiterated the principle by explaining the same in the
following manner: (SCC pp. 262-63, paras 13-15)
"13. The concept of 'blacklisting' is explained by this Court in [Erusian
Equipment & Chemicals Ltd. v. State of W.B., (1975) 1 SCC 70] as
under: (SCC p. 75, para 20)
'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.'
14. The nature of the authority of the State to blacklist the persons
was considered by this Court in the abovementioned case and took
note of the constitutional provision (Article 298), which authorises
both the Union of India and the States to make 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 the State to enter into a contract,
everybody has a right to be treated equally when the State seeks to
establish contractual relationships. The effect of excluding a person
from entering into a contractual relationship with the State would be
to deprive such person to be treated equally with those, who are also
engaged in similar activity.
15. It follows from the above judgment in [Erusian Equipment &
Chemicals Ltd. v. State of W.B., (1975) 1 SCC 70] that the decision of
the State or its instrumentalities not to deal with certain persons or
class of persons on account of the undesirability of entering into the
contractual relationship with such persons is called blacklisting. The
State can decline to enter into a contractual relationship with a person
or a class of persons for a legitimate purpose. The authority of the
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 the 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."
20. Thus, there is no dispute about the requirement of serving show-
cause notice. We may also hasten to add that once the show-cause
notice is given and opportunity to reply to the show-cause notice is
afforded, it is not even necessary to give an oral hearing. The High
Court has rightly repudiated the appellant's attempt in finding foul
with the impugned order on this ground. Such a contention was
specifically repelled in [Patel Engg. Ltd. v. Union of India, (2012) 11
SCC 257]."
8. In the case of Kulja Industries Ltd. Vs. Western Telecom Project
BSNL, reported in (2014) 14 SCC 731, the Hon'ble Supreme Court
held 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 precondition 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."
9. In the aforesaid judgments, the Hon'ble Supreme Court has held that
the State or its instrumentalities is free to decide not to deal with
certain persons or class of persons on account of undesirability of
entering into contractual relationship with such persons by passing the
order of blacklisting. There need not be any statutory grant of such
power. The only legal limitation upon the exercise of such an authority
is that the State is to act fairly and rationally for some legitimate
purpose without being arbitrary. The order of blacklisting has the effect
of depriving a person of equality of opportunity in the matter of public
contract and as such before passing such order the principles of natural
justice are required to be observed by serving a show-cause notice
thereby giving him an opportunity to meet the allegations which are in
the mind of the authority contemplating blacklisting of such a person.
10. Reverting back to the facts of the present case. The claim of the
petitioner is that it cannot be held liable for the delay caused in
commencement of the work, as it repeatedly represented the
respondents to remove the difficulties being faced in execution of the
work, however, they kept silent on the said representations. On the
contrary, the respondent-BCCL has contested that the petitioner failed
to comply the conditions mentioned in Clauses 6.1 and 4.2 of General
Terms and Conditions of contract, which consequently ended in
debarment of the petitioner. In fact, the respondent no.3 has issued
the impugned letter after giving several letters/reminders to the
petitioner to comply the said terms and conditions and as such, the
said action cannot be termed as arbitrary.
11. I have perused the relevant clauses of General Terms and Conditions
of the contract, which are quoted hereunder:-
"Clause 4.2
Performance Security should be 5% of contract amount and should be
submitted within 28 days of issuance of LoA by the successful bidder
in the form given below
----------
The Earnest Money/Bid Security deposited in the form of Bank
Guarantee shall be discharged when the Bidder has signed the
Agreement and furnished the required Performance Security/1st part
of security deposit.
The bid security deposited in the form of Demand draft/cash may be
adjusted against the Performance security (1st part of security deposit)
at bidder's option.
----------
Failure of the successful bidder to comply with the requirement as
above shall constitute sufficient ground for cancellation of the award
of work and forfeiture of the bid security/earnest money.
In addition to the above penal measures, the bidder will not be allowed
to participate in the re-tendering process. The bidder may also be
debarred from participating in future tenders in the subsidiary for a
minimum period of 12 Months.
Clause 6.1. If the contractor, without reasonable cause or valid
reasons, commits default in commencing the work within the aforesaid
time limit, the company shall, without prejudice to any other right or
remedy, be at liberty, by giving 15 days' notice in writing to the
contractor to commence the work, failing which to forfeit the Earnest
Money deposited by him and to rescind the Letter of Acceptance of
Tender/Work Order and also to debar the contractor to take part in the
future re-tender.
The Company may debar such defaulting Contractors from
participating in future Tenders for a minimum period of 12 (Twelve)
months."
12. It would thus be evident that Clause 4.2 obliges the contractor to
deposit the performance security within 28 days of issuance of the LoA,
failing which, apart from the penal action, the respondent-BCCL would
be at liberty to debar the bidder from participating in future tenders in
the said subsidiary for a minimum period of 12 months. Further,
Clause 6.1 speaks that if the contractor fails to commence the work
within the time limit without reasonable cause or valid reasons, then
apart from other actions, the contractor will also be debarred from
participating in future tenders for a minimum period of 12 months.
13. I also perused the undertaking given by the petitioner vide letter dated
30.07.2015, the relevant part of which is quoted hereinbelow:-
"Should this bid be accepted, we agree to furnish Performance Security
within 28 days of issue of letter of acceptance and commence the work
within 10 days of issue of letter of acceptance. In case of our failure to
abide by the said provision Bihar Coking Coal Limited shall, without
prejudice to any other right or remedy, be at liberty to cancel the letter
of acceptance/award and to forfeit the Earnest Money and also debar
us from participating in future tenders for a minimum period of 12
months."
14. Moreover vide letter dated 08.10.2020 issued by the respondent no.4
to the petitioner, it was instructed to deposit the Performance Security/
Additional Performance Security and commence the work at the
earliest failing which legal action was to be taken against it. Again, vide
letter dated 31.03.2021, the respondent no.4 issued final warning to
the petitioner for depositing the security amount as well as for starting
of the said work otherwise LoA was to be withdrawn in addition to
other suitable penal action to be taken as per the terms and conditions
of CEM/NIT/LoA. It is not the case of the petitioner that it had
deposited the Performance Security/Additional Performance Security
and had commenced the work within the stipulated time. It has rather
taken excuse of not performing its part of obligation by raising disputed
question of fact which cannot be entertained by this court under writ
jurisdiction.
15. It is, however, evident that the petitioner was repeatedly instructed by
the respondent-BCCL to deposit the Performance Security/Additional
Performance Security and to commence the work, but it failed to
comply the said direction, due to which the penal action as stipulated
under the terms of contract was taken. Consequently the letter of
debarment for a period of one year has been issued against it and
hence no such illegality, arbitrariness has been found in the decision
making process of the respondents. The purpose of issuing specific
show cause for blacklisting is to make the defaulting contractor aware
of the contemplated action of the tendering authority, however when
the consequential action is specifically provided in the terms and
conditions of the contract and the contractor with his open eyes
accepts it, he cannot reasonably claim violation of the principles of
natural justice on certain technical grounds since he was well aware of
the consequence of such default.
16. Otherwise also, it is found by this court that the petitioner has been
blacklisted for a period of one year which is the minimum punishment
prescribed under the terms of the contract. Had the order of
debarment of the petitioner been for more than the minimum
punishment, the position would have been a bit different and in such
a situation the respondents were supposed to pass a speaking order
after providing an opportunity of hearing to the petitioner to explain
as to why they had intended to impose higher punishment than the
minimum one.
17. In view of the aforesaid discussions, this court does not find sufficient
ground to interfere with the impugned letter bearing Ref. No.
BCCL/CED/GM(C)/2021-22/120 dated 28.05.2021 issued under the
signature of respondent no.3.
18. The writ petition being devoid of merit is, accordingly, dismissed.
(Rajesh Shankar, J.)
Sanjay/AFR
