Patna High Court
M/S Jai Mata Di Construction Co vs The Union Of India on 28 January, 2025
Author: Ashutosh Kumar
Bench: Partha Sarthy, Ashutosh Kumar
IN THE HIGH COURT OF JUDICATURE AT PATNA
Civil Writ Jurisdiction Case No.17661 of 2024
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M/s Jai Mata Di Construction Co. a Registered Partnership Firm having its
registered office at Professor Colony, Power House Road, P.S. and District-
Begusarai through its Partner namely Sri Sanjeev Kumar (Male), aged about
49 Years, Son of Late Digamber Prasad Singh, Resident of Ward No.8, P.O.-
Chandaur, P.S.-Bhagwanpur, District-Begusarai.
... ... Petitioner/s
Versus
1. The Union of India through Secretary, Department of Petroleum and Natural
Gas, New Delhi
2. The Secretary, Department of Petroleum and Natural Gas, New Delhi
3. The Indian Oil Corporation Ltd., through the Chief Manager (Contracts),
Indian Oil Corporation Ltd., Barauni Refinery, District-Begusarai, Bihar.
4. The Chief Manager (Contracts), Indian Oil Corporation Ltd., Barauni
Refinery, District-Begusarai, Bihar.
5. The Deputy General Manager (MN-CL), Indian Oil Corporation Ltd.,
Barauni Refinery, District-Begusarai, Bihar.
6. The Executive Director, Indian Oil Corporation Ltd., Barauni Refinery,
District-Begusarai, Bihar.
7. The Engineer-in-Charge of Work Order No.24998067/136 Dated
02.02.2017
, tender no. BCCC163605, Indian Oil Corporation Ltd., Barauni
Refinery, District-Begusarai, Bihar.
... ... Respondent/s
======================================================
Appearance :
For the Petitioner/s : Mr. Ashish Giri, Sr. Advocate
Mr. Sumit Kumar Jha, Advocate
Ms. Riya Giri, Advocate
For the Respondent/s : Mr. Ankit Katriar, Advocate
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CORAM: HONOURABLE THE ACTING CHIEF JUSTICE
and
HONOURABLE MR. JUSTICE PARTHA SARTHY
Patna High Court CWJC No.17661 of 2024 dt.28-01-2025
CAV JUDGMENT
(Per: HONOURABLE THE ACTING CHIEF JUSTICE)
Date : 28-01-2025
We have heard Mr. Ashish Giri, the learned
Senior Advocate for the petitioner and Mr. Ankit Katriar,
the learned Advocate for the respondents.
2. The challenge in this writ petition is to the
order dated 17.08.2024 issued under the signature of the
Deputy General Manager (MN-CL) Indian Oil Corporation
Limited (hereinafter referred to as "the IOCL"), whereby
the petitioner has been placed on the holiday list and has
been debarred from entering into contracts with IOCL for
a period of one year.
3. The petitioner has also sought release of
the additional security deposit which has been withheld by
IOCL under the contract.
4. The petitioner, a registered partnership
firm, bagged the contract vide Tender No. BCCC163605,
published by Barauni Refinery, IOCL for repair and
maintenance of roads at Barauni Refinery Township and
Patna High Court CWJC No.17661 of 2024 dt.28-01-2025
repair of existing road at outside boundary wall from
HarHar Mahadev Chowk to Etwa More. The repair work
had to be carried out within a period of four months. The
Letter of Acceptance was issued on 02.02.2017 and the
site was handed over to the petitioner on 17.02.2017. An
extension was given for completing the work up to
10.07.2017 without invoking the price reduction clause
under the General Conditions of Contract.
5. It is not in dispute that the work of repair
was completed on 10.07.2017 and the petitioner was
paid for the work executed. However, an additional
security deposit amounting to Rs. 14,08,538.11/- was
withheld, citing Clause 3.5 of the Special Condition of
Contract (Technical) which provided that contractor shall
repair/maintain roads and all major potholes for five years
including defect liability period and ten percent additional
security deposits would be effected from RA/final bills for
specified items in Part A and B of the contract.
6. The petitioner sought a breakup of
Patna High Court CWJC No.17661 of 2024 dt.28-01-2025
payment, which was provided to him promptly.
Thereafter, a request was made by the petitioner on
05.06.2020 for release of additional security deposit,
which was denied by the IOCL for the reason that the
petitioner had not carried out his obligation under Clause
3.5 of the Special Conditions of Contract (Technical), viz.,
maintaining and repairing the roads and the potholes for a
period of five years, inclusive of the defect liability period.
7. The petitioner instead was asked to
conduct a survey of the damaged road locations and
submit a plan for the repair of the same. The petitioner
raised the issue of lack of funds and agreed to undertake
the repair work on a chargeable basis, which, according to
IOCL, was in derogation of the terms of the contract.
8. The correspondence between the
petitioner and the IOCL with respect to release of the
additional security deposit continued on two occasions.
Request was made by the petitioner for appointment of
an Arbitrator. He also approached the Micro and Small
Patna High Court CWJC No.17661 of 2024 dt.28-01-2025
Enterprises Facilitation Council (MSEFC), but the IOCL
reminded the Council that the work in question fell under
the category of a works contract and, therefore, was
outside the ambit of MSME Act.
9. It further appears from the records that
an investigation was conducted by the IOCL Internal
Vigilance Department regarding non-compliance of
Clause 3.5, referred to above, and it was found that there
was non-compliance of such tender specification.
10. Thereafter, on the recommendation of
the Vigilance Department, a show-cause notice was
issued to the petitioner on 17.05.2024 explaining the
reason for non-compliance of Clause 3.5.
11. This was responded by the petitioner by
intimating the IOCL that he was never noticed during the
vigilance investigation and continued with his demand for
release of additional security deposit.
12. In the meantime, an application bearing
Request Case No. 95 of 2024 was also filed by the
Patna High Court CWJC No.17661 of 2024 dt.28-01-2025
petitioner for appointment of an Arbitrator.
13. Thereafter, a supplementary show-cause
notice for holiday listing of the petitioner was issued on
20.06.2024 giving detailed reasons for invoking Clauses
2.1(a), 2.1(i) and 2.1(r) of the Holiday Listing Guidelines
of the IOCL, to which the petitioner responded.
14. However, by order dated 17.08.2024,
an order was passed by the Deputy General Manager
(MNCL), Barauni Refinery placing the petitioner on the
holiday list and debarring him from entering any contract
with IOCL for a period of one year, effective from the
date of issuance of the order.
15. The debarment period is presently in
currency.
16. The case of the petitioner is that the
entire action of the IOCL in issuance of the show-cause
notice to the passing of the debarment order suffers from
violation of fair hearing; the allegations are vague; no
notice had been issued to him during the investigation by
Patna High Court CWJC No.17661 of 2024 dt.28-01-2025
the Vigilance Department of IOCL; the order of
debarment was based on ex-parte/unilateral report of the
Vigilance Department; the report was never furnished to
the petitioner; there was genuine confusion with regard to
the understanding of the obligation of the party; delayed
action of holiday listing was in the nature of a knee-jerk
reaction of the IOCL, after a demand was made for
release of additional security deposit; and the order of
debarment being completely disproportionate.
17. With respect to the vagueness of the
allegation and issue regarding his obligation under the
contract, Mr. Ashish Giri, the learned Senior Advocate
pointed out that the work was only for repair and
maintenance of roads at Barauni Refinery Township and
repair of existing road at outside boundary wall from
HarHar Mahadev Chowk to Etwa More for which the
completion time was provided as four months.
18. Thus, it was absolutely confusing
whether the maintenance of such roads for another five
Patna High Court CWJC No.17661 of 2024 dt.28-01-2025
years, inclusive of the defect liability period of one year,
was to be carried out without any charge or was it
included in the contract agreement at the stipulated cost.
19. The aforenoted argument of the
petitioner is without substance as Clause 3.5 of the
Special Condition of Contract (Technical) clearly
stipulates as hereunder:
"3.5 Contractor shall repair/
maintenance of roads & all major potholes for five
years including defect liability period. 10% additional
Security Deposits shall be effected from RA/Final
Bills for Following Items:
Part-A : Item No. 10, 20, 30, 40, 50,
90 & 100
Part-B : Item No. 10, 20, 30, 40, 50,
60, 70 & 80"
20. There could be no confusion in this
matter with regard to the obligation of the contractor to
maintain and repair the roads and all potholes for a period
of five years including defect liability period.
21. The contention of the petitioner further
is that he was always ready to repair the roads which
would be evident from the e-mail communication made by
him and that it is nowhere mentioned in the NIT that the
Patna High Court CWJC No.17661 of 2024 dt.28-01-2025
maintenance work for four years excluding the liability
free period had to be done free of cost.
22. The petitioner also questioned the very
rationale of invoking Clause 2.1(i) of the Guidelines in the
event of the readiness of the petitioner to repair the
roads, but on cost and his having completed the work
within time and without any complaint regarding the
quality of his work. The delayed invocation of the clause
has also been cited as one of the grounds holding the
debarment order to be bad in the eyes of law.
23. In response to the aforenoted
arguments, Mr. Ankit Katriar, the learned Advocate for
the IOCL has very categorically stated that Clause 3.5 of
the SCC leaves no room for confusion in the matter and
non-performance of the obligation set out therein entitles
the IOCL to withhold the additional security deposit. The
deposit was withheld only for the purposes of it being
retained as a performance guarantee towards the
obligation of the petitioner for maintaining the road for
Patna High Court CWJC No.17661 of 2024 dt.28-01-2025
five years.
24. It was also urged on behalf of the IOCL
that it is part of the internal policy of the Corporation to
entrust the Vigilance Department to conduct investigation
into the ongoing or completed works based on documents
and records and there is no necessity of notifying the
contractor for the same. The internal investigation by the
Vigilance adheres the IOCL's policy which do not mandate
any prior notice or disclosure of interim reports to the
contractor. The findings of the Vigilance Department are
based on document reviews and those are taken into
account only after issuance of a show cause notice to the
contractor, giving him reasonable opportunity to respond.
25. It was lamented by the Corporation that
instead of timely responding substantively to the issue of
maintenance flagged by the Corporation, the petitioner
continued to dilly-dally and take imaginary pretexts for
avoiding maintaining the roads.
26. As noted above, we have examined the
Patna High Court CWJC No.17661 of 2024 dt.28-01-2025
terms of the contract which specifically state that the
maintenance of the repaired roads had to be carried out
for five years, inclusive of the liability period, which clause
of the agreement was never objected to by the petitioner
during all this period.
27. We have also examined the
supplementary show cause notice issued to the petitioner
with respect to the proposal of his being put on holiday
list and debarring him for a particular period for dealing
with IOCL in future. There is no vagueness in the notice
and as also in the order putting the petitioner on the
holiday list for one year and therefore does not appear to
be unjustified to us.
28. With respect to the allegation of the
petitioner that the debarment order is disproportionate in
any case, it was submitted that putting a contractor on
holiday list is one of the ways of blacklisting, which is a
very drastic remedy, which need be subjected to rigorous
scrutiny.
Patna High Court CWJC No.17661 of 2024 dt.28-01-2025
29. There could be no two opinions about it.
30. Blacklisting has the effect of preventing
a person from the privilege and advantage of entering
into lawful relationship with another agency of the
Government also for the purposes of gains. For such a
disability to be foisted on a contractor, there should be an
objective satisfaction of the authority concerned. When a
demand is made and if the person concerned raises a
bonafide dispute in regard to the claim, so long as the
dispute is not resolved, he may not be declared to be a
defaulter [Refer to B.S.N. Joshi & Sons Ltd. vs. Nair
Coal Services Ltd. : (2006)11 SCC 548].
31. Similarly, in Kulja Industries Ltd. vs.
Chief General Manager Western Telecom Project
BSNL (2014)14 SCC 731, debarment as an effective
method of disciplining deviant contractor was recognised
but it was observed that it could not be permanent and
the period of debarment ought to depend upon the nature
of the offence committed by the erring contractor.
Patna High Court CWJC No.17661 of 2024 dt.28-01-2025
32. In a very pithily crafted judgment of the
Supreme Court in Blue Dreamz Advertising Pvt. Ltd.
and another vs. Kolkata Municipal Corporation and
others : 2024 SCC OnLine SC 1896 , the Supreme
Court has said that debarment as a remedy is to be
invoked in cases where there is harm or potential harm
for public interest particularly in cases where a person's
conduct has demonstrated that debarment, as a penalty
alone, will protect public interest and deter the person
from repeating his actions which have a tendency to put
public interest in jeopardy. If the case is of an ordinary
breach of contract and the explanation offered by the
person concerned raises a bonafide dispute, blacklisting/
debarment as a penalty ought not to be resorted to as it
would amount to civil death because of the commercial
ostracization. To readily invoking the debarment for
ordinary cases of breach of contract, where there is
bonafide dispute, is not permissible.
33. Citing this case, the learned Advocate
Patna High Court CWJC No.17661 of 2024 dt.28-01-2025
for the petitioner has submitted that there existed a
dispute, albeit a doubt whether repair work had to be
carried out free of cost or was it included as part of
obligation of the contractor in the agreement. This ought
to have been resolved before invoking the clauses in the
guidelines justifying the debarment.
34. We do not agree.
35. On a plain reading of the contract,
especially Clause 3.5 of the SCC, there appears to be no
doubt about the obligation of the contractor. Not repairing
the potholes for four years and then raising this dispute
unnecessarily was a ground good enough to take recourse
to debarment and withholding of the additional security
deposit.
36. The blacklisting order carries reasons
which justifies the penalty of putting the petitioner on a
holiday list for one year.
37. In our considered view, the penalty is
proportionate. The common-weal of road safety was also
Patna High Court CWJC No.17661 of 2024 dt.28-01-2025
compromised by the petitioner's unwillingness to carry
out his obligation under the contract for repairing the
roads and potholes for a particular number of years.
38. There is no merit in this petition and the
same is therefore dismissed.
(Ashutosh Kumar, ACJ)
(Partha Sarthy, J)
Sauravkrsinha/
Rajesh-
AFR/NAFR NAFR
CAV DATE 22.01.2025
Uploading Date 28.01.2025
Transmission Date NA
