Karnataka State Elctronics ... vs The State Of Bihar
2022 Latest Caselaw 4672 Patna

          IN THE HIGH COURT OF JUDICATURE AT PATNA
                    Civil Writ Jurisdiction Case No.13184 of 2022
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Karnataka State Electronics Development Corporation Ltd., Having its office at 2nd Floor, TTMC A Block, BMTC, Shanthinagar, K.H. Road, Bengaluru, Karnatka- 56027 through Maruthy. M, Assistant Manager (F and A), male, aged 56 years, S/o Late T. Munikrishnappa R/o, No. 30, 1st Main Road, 1st cross Kanaka Nagara, Yalachenahalli congress office, Bengaluru- 78, P.S.- Wilson Gaurden, Post Office- Wilson Gaurden, District- Bangaluru, Karnatka- 560027

... ... Petitioner/s Versus

1. The State of Bihar, through the Chief Secretary, State of Bihar.

2. The Development Commissioner-cum-Chairman, BSBCL, Bihar, Patna.

3. The Additional Chief Secretary, Prohibition, Excise and Registration Department, Bihar, Patna.

4. The Excise Commissioner, Prohibition, Excise and Registration Department, Bihar Patna.

5. The Managing Director, BSBCL, Bihar, Patna.

6. The Deputy Commissioner-cum-Nodal Officer, Prohibition, Excise and Registration Department, Bihar, Patna.

7. The General Manager, BSBCL, Bihar, Patna.

... ... Respondent/s ====================================================== Appearance :

     For the Petitioner/s   :       Mr. Kumar Amit
                                    Mr.Dhananjay Kumar
     For the Respondent/s   :       Mr.Vivek Prasad ( Gp 7 )
     For BSBCL              :       Mr. Vikash Kumar, Adv.
                                    Mr. Girijesh Kumar, Adv.

====================================================== CORAM: HONOURABLE MR. JUSTICE ASHUTOSH KUMAR and HONOURABLE MR. JUSTICE NAWNEET KUMAR PANDEY

ORAL JUDGMENT (Per: HONOURABLE MR. JUSTICE ASHUTOSH KUMAR)

Date : 01-12-2022

1. Heard the learned counsel for the parties.

2. The petitioner is a Government of Karnataka Patna High Court CWJC No.13184 of 2022 dt.01-12-2022

Enterprise having pan India presence, which has

been working in the field of software development

and I.T. since decades.

3. The grievance of the petitioner is that without

considering the reply of the petitioner dated

20.05.2022 pursuant to the show-cause issued to it

on 04.05.2022, the respondents have blacklisted the

petitioner for a period of one year.

4. The petitioner was selected as an Agency for

design, supply, installation, commissioning,

operations and maintenance for Integrated Excise

Management System (IEMS) for the Department of

Prohibition Excise and Registration, Govt. of Bihar

after the petitioner was declared successful in the

tender.

5. The petitioner had to work as a total solution

and service provider to undertake the projects of

development and implementation of the solution, its

roll-outs and sustained operations.

6. An agreement (Master Service Agreement), Patna High Court CWJC No.13184 of 2022 dt.01-12-2022

(hereinafter referred to as "MSA") was signed

between the parties, namely, the petitioner and the

Bihar State Beverage Corporation Limited (BSBCL)

on 16.01.2017. Under the MSA, Datacon

Technologies Pvt. Ltd. was empanelled as agency to

undertake the entire implementation of IEMS and

call centre projects. It has also been pointed out by

the petitioner that under the MSA, there was a

detailed provision for dispute resolution which

included escalation, mediation, arbitration and

conciliation Act, which could have been invoked by

the Department in case of any grievance against the

petitioner.

7. It is the case of the petitioner that several

times, issues with respect to unavailability of

infrastructure non- functional internet facilities at

check-posts and delayed payment for services

rendered, were brought to the notice of the

Department but those were never addressed. In

fact, the delay in various modules of projects was Patna High Court CWJC No.13184 of 2022 dt.01-12-2022

due to the Department not addressing those

grievances of the petitioner or of the Datacon

Technologies Pvt. Ltd.

8. The requirements under the agreement were

also changed a number of times, which was a

definite departure from the MSA or RFP document.

9. So far as the petitioner is concerned, the entire

hardware items were moved at Patna way-back in

August, 2017 but the work for Data Centre could not

begin till 2019 as the exact location could not be

finalized. Notwithstanding the aforesaid, most of the

modules of IEMS software were completed. In the

meantime, the respondent/Department blacklisted

the empanelled agency of the petitioner, namely,

Datacon Technologies Pvt. Ltd on 04.05.2022 for a

period of one month and thereafter such empanelled

agency and the petitioner were issued show-cause

notices as to why it should not be blacklisted.

10. The reply to the show-cause by the

petitioner and the empanelled agency /Datacon Patna High Court CWJC No.13184 of 2022 dt.01-12-2022

Technologies Pvt. Ltd which in fact was entrusted

with the entire task of implementation of IEMS, were

not considered and the empannelled agency as well

as the petitioner, both, were blacklisted on

03.06.2022

11. Be it noted that the call centre module, which

was part of IEMS was being run on an agreement

between the petitioner and BELTRON since 2018 but

no issue was ever raised by BELTRON either with

respect to salary of the employees or the working of

the call centers.

12. A perusal of the order of blacklisting suggests

that the Department was aggrieved because of the

delay in making the projects "go live" which was

attributed to non-implementation of various modules

of IEMS software and its poor management.

13. In the notice, it was declared by the

Department that the vendor / petitioner would be

obligated to take up the issue of poor management

of IEMS and call centers with the empanelled agency Patna High Court CWJC No.13184 of 2022 dt.01-12-2022

and resolve those to the satisfaction of the

Department within 30 days. The vendor / petitioner

was given the liberty to consider changing the

empanelled agency if it was not able to address the

grievance of the Department. The notice also

contained a caution sounded by the Department that

in case the empanelled agency / Datacon

Technologies Pvt. Ltd. was changed or substituted by

another, the transition ought to be smooth and it

should not disrupt either the IEMS or the call center

operations. Along with the afore-noted declaration,

the petitioner as well as it empanelled agency, both,

were directed to submit a reply as to why the

contract be not finally terminated and the petitioner /

vendor and the empanelled agency /Datacon

Technologies Pvt. Ltd be blacklisted for a period of

three years.

14. The learned counsel for the petitioner has

raised a grievance that the notice issued to the

petitioner or to its empanelled agency was not a Patna High Court CWJC No.13184 of 2022 dt.01-12-2022

notice as is contemplated in the commercial world

for a decision of blacklisting or termination of the

contract. The tenor of the notice reflected only the

grievance of the Department and provided an

opportunity to the vendor and the empanelled

agency to address those issues, sort it out, and in

the event of not doing so, there could be a decision

of termination of contract with the vendor and

blacklisting of the vendor as well as the empanelled

agency. The petitioner was never in contemplation

that such office memorandum, which the Department

calls a notice for blacklisting, to be a notice as such

but it was taken as an intimation to the petitioner in

its capacity as a vendor to improve the working of

IEMS and call centers. The notice would have

complete only if the Department would have held in

the notice that because of the delayed

implementation of the IEMS or the call centers, the

vendor/petitioner and the empanelled agency/

Datacon Technologies Pvt. Ltd. both were liable to be Patna High Court CWJC No.13184 of 2022 dt.01-12-2022

blacklisted and the contract terminated.

15. It has further been submitted that black-

listing entails very serious consequences. It takes out

a company from the privileges and advantages of

entering into any lawful relationship with the

Government for the purposes of gains. With an

action so stringent, with such cascading evil effects,

it has been argued, notice is a must as it is one of

the primary requirements of principles of natural

justice. Notice must intimate the noticee the

contemplation of the Department in view of

deficiency in service provided to black-list it. The

notice cannot be tentative, vague or providing the

various options to the noticee.

16. On a plain reading of the purported

notice, the petitioner thought it to be a reminder that

the services at IEMS and call centers ought to be

improved or upscaled, giving liberty to the vendor/

petitioner to further indicate the impediments faced

by the empanelled agency or the vendor, which Patna High Court CWJC No.13184 of 2022 dt.01-12-2022

could, in turn, have been addressed by the

Department. This office memorandum, the learned

Advocate submits, prima facie, appears to be a

consultation of one party with the other and not a

notice as required for as serious an action as black-

listing.

17. The order of black-listing dated

03.06.2022 refers to the same grievance of the

Department, viz. poor management of the IEMS and

call centres including certain new departures in the

implementation and execution of schemes. There is

reference of another show-cause notice having been

issued by the Department to the main vendor/

petitioner regarding supposed default in deduction

and contribution of E.P.F. and E.S.I. amount of

employees of the petitioner, who were engaged with

IEMS.

18. The sudden and complete shutdown of

servers on 31.05.2022, an event which occurred

post notice, was also taken into account for black- Patna High Court CWJC No.13184 of 2022 dt.01-12-2022

listing the petitioner, as such shutdown of servers

affected IEMS supply chain module leading to total

collapse of the call centres. This was an isolated/

separate event for which the petitioner had no notice

that this event shall be read squarely against the

petitioner for black-listing it.

19. The petitioner therefore, questions the

correctness of this reason as a ground for black-

listing the petitioner.

20. True it is, Mr. Vikas Kumar argues, that before

black-listing, a notice has to be given but there is no

requirement under law to segregate notices with

different fall-outs viz. termination of contract,

debarment, provisional black-listing and black-listing

for a specified term. The petitioner therefore cannot

clamour for want of notice. Even if the notice

referred to above did not qualify strictly to be called

a notice for black-listing, neither the vendor nor the

petitioner replied to the same and in a most un-

business like approach, the empanelled agency Patna High Court CWJC No.13184 of 2022 dt.01-12-2022

walked out of the agreement by giving only a 24

hours notice specially when the servers were down

and the IEMS and call centers were rendered totally

dysfunctional.

21. After having heard the learned counsel for the

parties, we find that the services provided by the

vendor through the agency of the petitioner i.e.

Datacon Technologies Pvt. Ltd., as an empanelled

agency, was not to the satisfaction of the

Department but black-listing the petitioner on

grounds with which the petitioner was never

confronted, would not be justifiable, regardless of

the proposition of law that a party to a contract in

such business venture ought to have some freedom

in getting the work executed and evaluating the

quality of work for it to continue or repeat such

arrangement with the agency/ petitioner. It is now

well settled that an order of black-listing, even it be

for a limited period, creates a disability and for

saddling a company with the aforesaid disability, Patna High Court CWJC No.13184 of 2022 dt.01-12-2022

there should be an objective satisfaction of the

authority passing such order.

22. In Erusian Equipment and Chemicals Ltd.

v. State of West Bengal 1975 (1) SCC 70, it

was conclusively held that in the event of a decision

by the State or its instrumentality not to deal with an

entity or enter into any contractual relationship with

it entails serious consequences. The authority of the

State to black-list a company is a necessary

concomitant of the executive power of the State to

carry on trade or business and making contracts for

any purpose and there is no need of any statutory

ground of such power, but there is an inherent

limitation, which is of fairness and rationality in the

decision.

23. Also refer to [Patel Engineering Ltd. v.

Union of India and Another, (2012) 11 SCC

257; Kulja Industries Ltd. v. Chief Gen.

Manager W. T. Proj. Bsnl., (2014) 14 SCC

731; Southern Painters v. Fertilizers and Patna High Court CWJC No.13184 of 2022 dt.01-12-2022

Chemicals Travancore Ltd. 1994 Suppl (2) SCC

699 ; BSN Joshi and Sons Ltd. v. Nair Coal

Services Ltd And Others, (2006) 11 SCC 548 ].

24. On a perusal of so-called notice and the final

order of termination, we find that the notice was not

complete in itself as it did not intimate the noticee

about the positive displeasure of the Department

regarding the work carried out uptill then and the

intention to black-list the petitioner, if the

explanations were not found to be plausible or

satisfactory. The entire spectrum of notice was

towards the displeasure at poor management of

IEMS and call centres and an invocation of the

vendor and the empanelled agency i.e. the petitioner

to improve upon the same. There was no final

conclusion of the Department that the services

rendered by the vendor with the agency of the

petitioner was unsatisfactory; not of the standard

and not in tune with the requirements under the

MSA. This cannot be held to be a proper notice for Patna High Court CWJC No.13184 of 2022 dt.01-12-2022

the petitioner to respond. The petitioner was never

never confronted with the later developments, in

that event, those facts could not have weighed with

the Department for taking a decision of black-listing

the petitioner for three years.

25. The order of black-listing does not appear to

be in conformity with the legal requirements of such

order being passed after the petitioner was noticed

with clarity and had an opportunity to represent his

cause.

26. For the afore-noted reason alone, we set aside

the order of black-listing for three years against the

petitioner, regardless of the fact that the services

offered by the petitioner were not at all to the

satisfaction of the Department and direct that after

giving fresh notice to the petitioner and adverting to

the reply, a fresh decision shall be taken by the

Department regarding black-listing.

27. The entire exercise be concluded within a

period of three months, to be counted from the date Patna High Court CWJC No.13184 of 2022 dt.01-12-2022

of receipt / production of a copy of this order before

the concerned Department.

28. With the afore-noted observation, the writ

petition stands disposed off.

(Ashutosh Kumar, J)

( Nawneet Kumar Pandey, J) sunilkumar/-

AFR/NAFR                NAFR
CAV DATE                N/A
Uploading Date          09.12.2022
Transmission Date       N/A