M/S. Panda Infraproject Limited vs State Of Odisha And Others
2021 Latest Caselaw 4010 Ori

                     IN THE HIGH COURT OF ORISSA AT CUTTACK

                                    W.P.(C) No.26408 of 2017
             M/s. Panda Infraproject Limited         ....         Petitioner
                                          Mr. M. Kanungo, Senior Advocate
                                        -versus-
             State of Odisha and others              .... Opposite Parties
                                                 Mr. D.K. Mohanty, A.G.A.
                         CORAM:
                         THE CHIEF JUSTICE
                         JUSTICE B. P. ROUTRAY

                                         ORDER

23.03.2021 Order No.

26. 1. The challenge in the present petition by the Petitioner, who is admittedly a Super-Class Contractor is to an order dated 12th December, 2017 passed by the Chief Engineer (DPI & Roads), Odisha banning the Petitioner "from participating or bidding for any work to be undertaken by Government of Odisha" and also banning it from "transacting business with Government of Odisha either directly in the name of propriety bidder or indirectly under different name or title".

2. The background to the present petition is that the Petitioner, who is a contractor involved in the construction of rail over bridge (ROB) along with bridge over ROB at-L.C. No-188- SPL- 3E at-RD-433/23.25 km. of Howrah-Chennai Railway Line at RD-1/200 km from N.H.-203 (Bomikhal Square) connected to RD-1/30 km. to Janapath Via-Maharshi College, Saheed Nagar. It is stated that there was an accident where ten meters slab collapsed during the concreting of the said ROB at Level

Crossing No.188 SPL-3E, Bhubaneswar resulting the death of one person and injuries to some others.

3. As a result of this incident, a Committee was formed by the Works Department, Government of Odisha to enquire into and submit a detailed report. That report was submitted on 26 th September, 2017. The said inquiry report is stated to have placed the responsibility for incident on the Petitioner.

4. By letter dated 10th October, 2017, the Under Secretary to Government of Odisha, Works Department addressed the communication to the Chief Engineer (DPI & Roads) stating that on the basis of the aforementioned report submitted by the Committee on 22nd September, 2017 the "Government orders have been obtained for blacklisting M/s.Panda Infra Projects (India) Pvt. Ltd., Bhubaneswar, the contractor for intentional violation of important conditions of contract, leading to injuries and loss of life. You are therefore requested to take immediate necessary action may be processed for blacklisting the contractor M/s. Panda Infra Projects (India) Pvt. Ltd., Bhubaneswar, following the procedure as per OPWD Code."

5. As a result of the above direction, a show cause notice (SCN) was issued by the Chief Engineer to the Petitioner on 18th October, 2017 asking the Petitioner to show cause why it should not be blacklisted.

6. On 1st November, 2017, the Petitioner submitted a detailed reply to the SCN notice inter alia pointing out that the contract

was a P1 contract, wherein items of work executed, their quantity and rates are specified in the contract itself. The work had to be executed by the contractor "as per detail Design, Drawing and Specifications determined, approved and provided by the Department and also as per the direction of Engineer-in-Charge of the site." It was further stated that before casting of the Span from P19 to P20 the arrangement of the Petitioner for "shuttering and centering, staging, safety arrangements were inspected by the Departmental Engineers and the reinforcement were measured" and after which the Petitioner was allowed to "lay concrete which were also executed in presence of the Departmental Engineers". It was also stated that "all our material permanent as well as temporary" had satisfied the requisite specifications that have been accepted by the Engineer-in-Charge and they were permitted to go ahead to the concreting under the direct supervision of Departmental Engineers "after they were satisfied all our arrangements." The Department was accordingly asked to withdraw the SCN.

7. Thereafter the impugned order was passed on 12th December, 2017, blacklisting the Petitioner "with immediate effect" as per codal provisions for "intentional violation of the condition of contract leading to injuries and loss of life." The registration of the Petitioner as a Super Class Contractor also stood suspended.

8. This Court has heard the submission of Mr. Milan Kanungo, learned Senior Counsel for the Petitioner and Mr. D.K. Mohanty, learned Additional Government Advocate.

9. Mr. Kanungo submits that the entire action leading to the blacklisting of the Petitioner was pre-determined. Admittedly the SCN itself was issued under the direction of the Under Secretary to the Government contained in the letter dated 10th October, 2017 to the Chief Engineer. He points out that there was no mention made of this letter in the SCN. Also the fact that the enquiry report dated 26th September, 2017 submitted by the Committee had placed the responsibility for the mishap on the Petitioner, which led to the impugned action, was not mentioned in the SCN. In other words, the real reasons that led to the issuing of the SCN were not mentioned therein.

10. Secondly, it is pointed out by Mr. Kanungo that in the impugned order there was no reference to the fact that a SCN was issued to the Petitioner on 18th October, 2017 to which the Petitioner had replied on 1st November, 2017. The impugned order also did not deal with the any of the Petitioner‟s submission. It simply reiterated the allegation in the SCN that the Petitioner had intentionally violated the condition of the contract leading to injuries and loss of life.

11. Lastly, it is submitted by Mr. Kanungo that there cannot be an order for permanent blacklisting and this is contrary to the law explained in several judgments including Kulja Industries Limited v. Chief General Manager, Western Telecom Project Bharat Sanchar Nigam Limited (2014) 14 SCC 731 and the recent judgment dated 6th November, 2020 of the Supreme Court

of India in Civil Appeal No.3647 of 2020 (Vetindia Pharmaceuticals Limited v. State of Uttar Pradesh). Mr. Kanungo also places reliance on the judgments in Erusian Equipment & Chemicals Ltd. v. State of West Bengal (1975) 1 SCC 70, Raghunath Thakur v. State of Bihar (1989) 1 SCC 229 and a judgment of this Court in W.P.(Civil) No.20554 of 2017 (M/s.Gupta Sports v. State of Odisha).

12. Mr. D.K.Mohanty, learned counsel appearing for the Opposite Parties is unable to dispute that the impugned order makes no reference to a SCN having been issued to the Petitioner to which the Petitioner replied on 1st November, 2020. The counter affidavit terms the Petitioner‟s contention that the scaffolding, centering and shuttering had been inspected and approved by the official of the Engineering Department as "an intelligent plea to shirk responsibility".

13. Reference is made in the counter affidavit to Clause 115.3 of the MORT&H specification for Road and Bridges (5th revision) under which the sole responsibility for adequacy and safety of the method adopted by the contractor shall rest on the contractor irrespective of any approval by the Engineer. Reference is also made to Sub-section 1503.1 of Section 1500 of MORT&H specification (4th revision) which inter alia states that "notwithstanding any approval or review of drawings and design by the Engineer, the contractor shall be entirely responsible for the adequacy and safety for framework".

14. What the counter affidavit is silent on is the fact that the entire action was triggered by the report submitted on 26 th September, 2017 by the Committee. The counter affidavit is also unable to deny that it is only pursuant to the direction issued on 10 th October, 2017 by the Works Department to the Chief Engineer (DPI & Roads), that the impugned SCN was issued. The counter affidavit also does not dispute the fact that in the SCN issued to the Petitioner no reference is made to the above letter dated 10th October, 2017 or the report dated 26th September, 2017 of the Committee.

15. In the rejoinder affidavit the Petitioner points out how the design for Pb19 & Pb20 was changed and the Petitioner was allowed to complete all the balance fifteen spans from the period September, 2017 to March, 2018; that even after the SCN was issued to it, the Petitioner completed all seventy five spans of the approach roads both on the Saheed Nagar side and the Rasulgarh side by 31st March, 2018 i.e., within the time granted by the Department.

16. At this stage, it requires to be noted that pursuant to an order passed by this Court on 26th November, 2018 permitting the Petitioner to approach the Chief Engineer with a representation, the Petitioner on 11th December, 2018 submitted a twelve page representation reiterating that it had not violated any terms and conditions of the contract. It is stated that even before the Committee, which enquired into the incident, the Petitioner was not given a chance to put forth its defence.

17. Although this Court on 26th November, 2018 had directed that a fresh decision should be taken within two months of the making of the representation, that direction appears not to have been complied with.

18. It must also be mentioned that the Court has been provided with a copy of the report of the Disciplinary enquiry of a three- member Committee which examined the conduct of three of the Department officers involved in the project. It does not appear to have held any of the three officials guilty of dereliction of duty.

19. The Court finds that the manner in which the Opposite Parties have proceeded against the Petitioner, on the face of it bears out the principal ground of challenge viz., that the impugned action of blacklisting the Petitioner was pre-determined. A perusal of the letter dated 10th October, 2017 written by the Under Secretary in the Works Department to the Chief Engineer shows that the Government had already ordered blacklisting of the Petitioner and asked the Engineer-in-Chief to take immediate action "for blacklisting the contractor" even before a SCN was issued to the Petitioner.

20. There is merit in the contention of Mr. Kanungo that the issuing of a SCN to the Petitioner thereafter and eliciting a reply thereto, was an empty formality which was not going to change the decision already taken to blacklist the Petitioner. This also explains why the SCN makes no reference to the letter dated 10th

October, 2017 or to the report of the Committee, which led to issuance of that letter. It is also surprising that the impugned order makes no reference to the fact that an SCN was issued to the Petitioner or to the detailed reply thereto by the Petitioner.

21. Indeed, there is no answer to the contention of the Petitioner that despite issuance of the SCN containing serious allegations of violations by the Petitioner of the terms and conditions of the contract, the Petitioner was asked to execute the balance work, on a revised design, which the Petitioner admittedly completed to the satisfaction of the Department by 31st March, 2018.

22. This casts serious doubts on whether the Engineer-in-Chief, who passed the impugned order, applied his mind to the defence taken by the Petitioner in its reply denying violation of any of the terms and conditions of the contract. The impugned order does not discuss any of the defences of the Petitioner and why the Engineer-in-Chief did not find them to be acceptable. All of this renders the impugned order arbitrary, unreasonable and violative of Article 14 of the Constitution.

23. In Erusian Equipment (supra), the Supreme Court observed as under:

"15.......The blacklisting order involves civil consequences. It casts a slur. It creates a barrier between the persons blacklisted and the Government in the matter of transactions. The black lists are instruments of coercion.

......

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."

24. It was reiterated in Raghunath Thakur (supra), "4.........(I)t is an implied principle of the rule of law that any order having civil consequences should be passed only after following the principles of natural justice. It has to be realized 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."

25. In the considered view of the Court, the impugned order of blacklisting the Petitioner does not satisfy the requirements of law and in particular the bare necessity that an order blacklisting a contractor has to spell out the reasons in clear and unmistakable terms; must state that it has been passed after eliciting a reply from the contractor; spell out the reasons why the plea of the contractor was found unacceptable. In that sense, the impugned order is an unreasoned, non-speaking one.

26. The other serious problem with the impugned order is that it makes the blacklisting permanent, which is legally untenable as explained in Kulja Industries Limited (supra) by the Supreme Court as under:

"24. Suffice it to say that „debarment‟ is recognised and often used as an effective method for discriplining deviant suppliers/contractors who may have committed acts of omission and commission or frauds including misrepresentations, falsification of records and other breaches of the regulations under which such contracts were allotted. What is notable is that the „debarment‟ is never permanent and the period of debarment would invariably depend upon the nature of the offence committed by the erring contractor."

27. The above legal position was reiterated in Vetindia Pharmaceuticals Limited (supra) as under:

"An order of blacklisting operates to the prejudice of a commercial person not only in praesenti but also puts a taint which attaches for beyond any may well spell the death knell of the organization/instruction for all times to come described as a civil death. The repercussions on the appellant were clearly spelt out by it in the representations as also in the writ petition, including the consequences under the Rajasthan tender, where it stood debarred expressly because of the present impugned order. The possibility always remains that if a proper show cause notice had been given and the reply furnished would have been considered in accordance with law, even if the respondents decided to blacklist the appellant, entirely different considerations may have prevailed in tier minds especially with regard to the duration."

28. A reference in the above decision was also made to an earlier decision in M/s.Daffodills Pharmaceuticals Ltd. v. State of U.P. 2019 (17) SCALE 758 wherein an order of blacklisting a contractor for a period beyond three years up to a maximum of five years was considered disproportionate.

29. For the aforementioned reasons, this Court finds the impugned order blacklisting the Petitioner to be unsustainable in law and it is hereby set aside.

30. This petition is allowed in the above terms.

(Dr. S. Muralidhar) Chief Justice

( B.P. Routray) Judge

C.R. Biswal/ B.K. Barik