Orissa High Court
M/S. Durga Electricals And vs Mahanadi Coalfields Limited on 15 February, 2022
ORISSA HIGH COURT: CUTTACK
W.P.(C) No. 17239 of 2021
In the matter of an application under Article 226 of the
Constitution of India.
---------------
AFR
M/s. Durga Electricals and
Electronics ..... Petitioner
-Versus-
Mahanadi Coalfields Limited
and others ..... Opp. Parties
For Petitioner : Mr. Manmaya Kumar Dash,
Advocate.
For Opp. Parties : M/s D. Mohanty, A. Mishra,
B.P. Panda and D. Behera,
Advocates
P R E S E N T:
THE HONOURABLE DR. JUSTICE B.R.SARANGI
AND
THE HON'BLE MR. JUSTICE V. NARASINGH
Date of hearing and judgment :: 15.02.2022
DR. B.R. SARANGI, J. The petitioner, by means of this writ
petition, seeks to quash the order dated 26.05.2021 in
Annexure-5, by which the bid of the petitioner has been
rejected and the petitioner has been banned for 2 (two)
// 2 //
years from being eligible to submit bids in CIL and its
subsidiaries from the date of its issuance, taking recourse
to Clasue-14(E) of the NIT; as also the consequential work
order dated 26.05.2021 issued in favour of opposite party
no.5 (inadvertently numbered as '4') vide Annexure-6; and
to issue direction to the opposite parties to consider the
representation of the petitioner dated 30.05.2021 under
Annexure-7, within a stipulated period.
2. The factual matrix of the case, in brief, is that
the petitioner is a proprietorship firm and participated in
the process of tender, pursuant to the online bid invited
by opposite party no.3, having digital signature certificate
authorized by the Controller of Certifying Authority (CCA),
Government of India, in respect of the work "Conversion of
3.3 kV overhead line (Pump feeder) to 33 kV overhead line
to feed power to proposed temporary field substation near
stock No-6 of Ananta OCP of Jagannath Area". Following
due procedure of selection, the petitioner was declared as
L-1 bidder. When the petitioner was waiting for the work
order, on 26.05.2021, it was issued with a letter
// 3 //
intimating that with reference to the NIT, the petitioner
has participated in the tender and became L-1 bidder, but
it failed in submitting the requisite document online as
per NIT. Therefore, as per Clause-14(E) of the NIT, the bid
of the petitioner was rejected and it was banned for 2
(two) years from being eligible to submit bids in CIL and
its subsidiaries from the date of issue of the said letter.
The very fact, that the petitioner was declared as L-1,
establishes that it had produced all the relevant
documents. Therefore, it was urged that subsequent
rejection of its bid and banning the petitioner from
participating for two years in the bids of CIL and its
subsidiaries, vide Annexure-5 dated 26.05.2021, which
amounts to blacklisting, is illegal, arbitrary and contrary
to the settled position of law, and so also the
consequential issuance of work order vide Annexure-6 in
favour of opposite party no.5. Hence this writ petition.
3. Mr. M.K. Dash, learned counsel for the
petitioner contended that the impugned communication/
order, vide Annexure-5 dated 26.05.2021, banning the
// 4 //
petitioner for two years from being eligible to submit bids
in CIL and its subsidiaries, cannot be sustained in the eye
of law, having been passed without giving opportunity of
hearing to the petitioner, which amounts to gross
violation of principles of natural justice. To substantiate
his contention, he has placed reliance on TELSA
Transformers Limited v. Odisha Power Transmission
Corporation Limited, 2016 (II) ILR CTC-237 and UMC
Technologies Private Limited v Food Corporation of
India (Civil Appeal No. 3687 of 2020 disposed of on
16.11.2020).
4. Mr. Debraj Mohanty, learned counsel
appearing for the opposite parties, vehemently contended
that since the petitioner had not submitted the requisite
documents through online as per NIT, taking recourse to
Clause-14(E) of the NIT, the bid of the petitioner has been
rejected. As the petitioner has not adhered to the terms
and conditions of the bid, it is not entitled to participate
in the future bids. Therefore, the order impugned dated
// 5 //
26.05.2021 has been passed, for which no fault can be
found with the authorities.
5. This Court heard Mr. M.K. Dash, learned
counsel for the petitioner and Mr. D. Mohanty, learned
counsel appearing for the opposite parties by hybrid
mode, and perused the record. Pleadings having been
exchanged between the parties, with their consent this
writ petition is being disposed of finally at the stage of
admission.
6. Though multiple reliefs have been sought
before this Court, in course of hearing, Mr. M.K. Dash,
learned counsel for the petitioner contended that the
petitioner is aggrieved by that part of the order dated
26.05.2021, whereby it has been banned for two years
from being eligible to submit bids in CIL and its
subsidiaries, and he confined the writ petition to such
relief only, as in the meantime, the work in question has
already been allotted in favour of opposite party no.5 vide
Annexure-6 and he has no knowledge whether he has
progressed with the work or not.
// 6 //
7. On the basis of the factual matrix as
delineated above, there is no dispute that the petitioner
was selected by the opposite parties for award of the work
"Conversion of 3.3 kV overhead line (Pump feeder) to 33 kV
overhead line to feed power to proposed temporary field
substation near stock No-6 of Ananta OCP of Jagannath
Area", pursuant to the Tender ID No.
2021_MCL_204099_1. The petitioner, having participated
in the tender and declared as L-1, the work would have
been allotted in his favour, but taking recourse to Clause-
14(E) of the NIT, the bid of the petitioner has been
rejected, vide Annexure-5 dated 26.05.2021, on the
ground that the petitioner has failed to submit the
required documents through online as per NIT, and
simultaneously the petitioner has been banned for two
years from being eligible to submit bids in CIL and its
subsidiaries.
8. Clause- 14(E) of the NIT, being relevant for the
purpose of effective adjudication of this case, is extracted
hereunder:-
// 7 //
"In case the L-1 bidder fails to submit requisite
documents online as per NIT or if any of the
information/declaration furnished by L-1 bidder
online is found to be wrong by Tender Committee
during evaluation of scanned documents uploaded
by bidder, which changes the eligibility status of
the bidder, then his bid shall be rejected and the
bidder will be banned for two years from being
eligible to submit bids in CIL and its subsidiaries."
On perusal of the aforementioned clause, it is made clear
that if the L-1 bidder fails to submit requisite documents
online as per NIT, then his bid shall be rejected and the
bidder will be banned for two years from being eligible to
submit bids in CIL and its subsidiaries. But nothing has
been placed on record to show as to which document the
petitioner was required to submit online as per NIT.
Merely referring to Clause-14(E) of the NIT, the bid of the
petitioner could not have been rejected and, as such, the
petitioner could not have been banned for two years from
being eligible to submit bids in CIL and its subsidiaries
from the date of issuance of the letter dated 26.05.2021
in Annexure-5. By issuing such letter, the petitioner has
been blacklisted by the opposite parties. As a matter of
course, while blacklisting the petitioner, the minimum
requirement of compliance of natural justice had to be
// 8 //
followed. As such the petitioner has been condemned
without being given an opportunity of hearing.
9. In Nova Steel (India) Ltd vs M.C.D. And Ors,
AIR 1995 SC 1057 the apex Court held that the question
of blacklisting of the contracts have been considered by
the Courts time and again and it has categorically been
held that such order cannot be passed without giving
opportunity of hearing to the party.
10. In Urusian Equipment & Chemicals Ltd. v.
State of West Bengal, AIR 1975 SC 266, the apex Court
held that 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 offence is similarly
examinable by a writ Court. The apex Court also declared
that blacklisting has the effect of preventing a person
from entering into lawful relationship with the
Government for purposes of gains and the authority
// 9 //
passing any such order is required to give a fair hearing
before passing an order of blacklisting in certain entity.
11. In Mr. B.S.N. Joshi & Sons Ltd v. Nair Coal
Services Ltd. & Ors, (2006) II SCC 548 : AIR 2007 SC
437 and a long line of decisions have followed the ratio of
that decision and applied principle of audi alteram partem
to the process that may eventually culminate in the
blacklisting of a contractor.
12. In TELSA Transformers Limited (supra), this
Court also taking into consideration the ratio of Gorkha
Security Services v. Government (NCT of Delhi), AIR
2014 SC 3371 held that merely because clause in notice
inviting tender empowers the department to impose such
penalty that does not mean that such penalty can be
imposed without putting defaulting contractor to notice to
this effect.
13. In Kulja Industries Limited v. Chief General
Manager, Western Telecom Project Bharat Sanchar
Nigam Limited and others, (2014) 14 SCC 731, the
// 10 //
apex Court held, if State or its instrumentality takes
decision on blacklisting then such decision is subject to
judicial review on grounds of principles of natural justice,
doctrine of proportionality, arbitrariness and
discrimination under Article 14 of the Constitution of
India.
14. In UMC Technologies (supra), the apex Court
has also taken note of the decision of the apex Court in
Erusian Equipment & Gorkha Security (supra) and has
come to a conclusion that a prior show cause notice
granting a reasonable opportunity of being heard is an
essential element of all administrative decision-making
and particularly so in decisions pertaining to blacklisting
which entail grave consequences for the entity being
blacklisted. Therefore, furnishing of a valid show cause
notice is critical and a failure to do so would be fatal to
any order of blacklisting pursuant thereto.
15. Taking into consideration the factual matrix
and the propositions of law, as discussed above, this
Court is of the considered view that, since the order
// 11 //
impugned dated 26.05.2021 in Annexure-5 has been
passed banning the petitioner for two years from being
eligible to submit bids in CIL and its subsidiaries from the
date of issue of the letter, without complying the principle
of natural justice, the same cannot be sustained in the
eye of law and, as such, the same is liable to be quashed
and hereby quashed.
16. The writ petition is allowed to the extent
indicated above. No order as to costs.
..................................
DR. B.R. SARANGI,
JUDGE
V. NARASINGH, J. I agree
..................................
V. NARASINGH,
JUDGE
Orissa High Court, Cuttack
The 15th February, 2022, Arun/GDS
