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2012 DIGILAW 553 (PAT)

Sri Ram Enterprises v. Union of India

2012-04-02

RAMESH KUMAR DATTA

body2012
ORDER Heard learned counsel for the petitioner and learned counsel for the respondent Railways. 2. The petitioner seeks quashing of the letter dated 8.7.2010 issued by the Ministry of Railways (Railway Board) banning the business dealing with the petitioner and its allied/sister concerns/partners for a period of three years commencing with immediate effect on Indian Railways and Production Units, etc. 3. The petitioner has also sought a direction on the respondents to release the bill amount of the petitioner lying with the respondents for a sum of Rs.15,74,624/- on account of the petitioner having completed the entire work under the contract agreement dated 30.4.2007 but learned counsel for the petitioner submits that he is not pressing the said relief at present as during the pendency of the writ application the Railways have terminated the contract on the ground of sub-standard performance and the petitioner seeks liberty to challenge the same in appropriate proceedings. The liberty sought is allowed. 4. The short facts of this case are that the petitioner was given a contract for improvement of approach road to station at Sultanganj under Section Engineer (Works) of Bhagalpur by a letter of acceptance dated 29.11.2006. On 1.2.2007 the Assistant Engineer(L)/Jamalpur issued a letter pointing out certain discrepancies during the inspection of the petitioner’s work. Again a further letter was issued referring to certain inspection made and ultimately statement of charges of misconduct against the petitioner was issued by Memo dated 9.3.2009 directing the petitioner to show cause as to why the business dealings with the petitioner and its allied/sister concerns/partners be not banned for a period of three years. Broadly, the charges mentioned were three in number. The first charge was for execution of inferior quality RCC M-20 work for a length of 424 meters. It was alleged that during the joint vigilance check of the subject work on 17.5.2007 samples of executed concrete of M-20 grade was collected from three locations of the road and they were sealed and sent to National Test House, Kolkata for testing the proportion of constituents and from the test report it was found that the proportion of cement, sand and stone chips used in the work was not of the specified proportion. Further during concreting, cubes were collected which failed to meet the required comprehensive strength of M-20 as per the test report of BCE/Bhagalpur. Further during concreting, cubes were collected which failed to meet the required comprehensive strength of M-20 as per the test report of BCE/Bhagalpur. The second charge relates to non-provision of reinforcement in a part of the road work and it is stated that casting of concrete had been deliberately done by the petitioner in absence of railway inspectors. The third charge was that the petitioner had persistently violated the bona fide/legitimate instructions of the railway officials. 5. In the report submitted by the National Test House, Eastern Railway, Kolkata it was clearly mentioned that the samples were received without sealed condition. Thereafter in the impugned order dated 8.7.2010 relying upon the Test Report the charge No.1 is found to be established that sub-standard proportion of cement, sand and stone chips were used in the work. The other two charges were also held to be established and it was decided by the Ministry of Railways (Railway Board) to ban the business dealings with the petitioner and its allied/sister concerns/partners for a period of three years with immediate effect on Indian Railways and its Production Units. Aggrieved by the same the petitioner has approached this Court. 6. Learned counsel for the petitioner submits that the finding of sub-standard work is without any basis as the National Test House, Kolkata has clearly mentioned that the samples were received without seal. Hence no reliance can be placed on the said report with respect to the work of the petitioner and thus the main charge regarding sub-standard work must be held to have failed. It is urged that so far as the other two charges are concerned, on the basis of the same the business of the petitioner could not have been banned for a period of three years. It is further urged that the business of the petitioner has been banned by order dated 8.7.2010 and nearly one and three quarters year have already elapsed which is more than sufficient punishment to the petitioner considering the remaining two charges that have been held to be established even if the same are to be accepted. 7. Learned counsel for the respondent Railways submits that the petitioner has never challenged the validity of the samples before the Railways and for the first time the issue has been raised before this Court. 7. Learned counsel for the respondent Railways submits that the petitioner has never challenged the validity of the samples before the Railways and for the first time the issue has been raised before this Court. It is thus submitted that no benefit can be derived by the petitioner on account of the fact that the National Test House has reported that the samples were without seal. 8. It is further submitted that the only requirement for blacklisting which results in civil consequences is to provide an opportunity of hearing to the contractor and once the principle of audi alteram partem is followed the order is not open to challenge. In support of the same proposition, learned counsel relies upon a decision of the Supreme Court in the case of Grosons Pharmaceuticals(P) Ltd. & Anr. Vs. The State of Uttar Pradesh & Ors. : 2001(4) PLJR 145 (SC), in paragraphs 2 and 3 it has been held as follows :– “2. Learned counsel appearing for the appellant, urged that seeing the nature and seriousness of the order passed against the appellant, the respondent ought to have supplied all the materials on the basis of which the charges contained in the show cause notice were based along with show cause notice and in the absence of supply of materials, the order impugned is against the principle of natural justice. We do not find any merit in this contention. Admittedly, the appellant has only contractual relationship with the State Government and the said relationship is not governed by any statutory rules. There is no statutory rule which requires that an approved contractor cannot be blacklisted without giving an opportunity of show cause. It is true that an order blacklisting an approved contractor results in civil consequences and in such a situation in the absence of statutory rules, the only requirement of law while passing such an order was to observe the principle of audi alteram partem which is one of the facet of the principles of natural justice. The contention that it was incumbent upon the respondent to have supplied the material on the basis of which the charges against the appellant were based was not the requirement of principle of audi alteram partem. It was sufficient requirement of law that an opportunity of show cause was given to the appellant before it was blacklisted. The contention that it was incumbent upon the respondent to have supplied the material on the basis of which the charges against the appellant were based was not the requirement of principle of audi alteram partem. It was sufficient requirement of law that an opportunity of show cause was given to the appellant before it was blacklisted. It is not disputed that in the present case, the appellant was given an opportunity to show cause and he did reply to the show cause which was duly considered by the State Government. We are, therefore, of the view that the procedure adopted by the respondent while blacklisting the appellant was in conformity with the principles of natural justice. 3. It was then urged that the impugned order blacklisting the appellant does not contain any reasons and, therefore, the order is invalid. We do not find any merit in the submission. The High Court summoned the entire record and found that elaborate reasons were recorded by the State Government while passing the order blacklisting the appellant. The High Court further recorded a positive finding that the State Government has passed the impugned order after recording elaborate reasons and summary of which is contained in the impugned order.” 9. Learned counsel for the Railways also sought to rely upon a decision of the Apex Court in the case of Tata Cellular Vs. Union of India : (1994) 6 SCC 651 , in paragraph 94 of which the principles on which decision taken in contractual matters ought to be examined by the courts has been laid down, which is quoted below : “94. The principles deducible from the above are.–(1) The modern trend points to judicial restraint in administrative action. (2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. (3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. (5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facets pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.” 10. I have considered the submissions of learned counsels for the parties. It is evident from the memorandum of charges that the most relevant and objective material could have been with respect to charge no.1 in which samples were collected and sent to the National Test House for testing. It is true that the National Test House, Kolkata has found proportion of constituents of cement, sand and stone chips in the sample which was sub-standard in proportion to the requirement. That part of its report is not under challenge. However, the most important aspect of the matter is that the Test Certificate issued by the National Test House clearly mentioned the fact that the samples were received without sealed condition. It is an established principle that any such test result could be of any authenticity vis-à-vis the party concerned only when the same was sent in sealed condition. If it is without seal then the authenticity of the sample test becomes disputed and it could not be said that the test result was with respect to the samples that had been taken out from the site of the work done by the petitioner. Thus no inference can be drawn against the petitioner on the basis of the Test Report from the National Test House, Kolkata that the petitioner had used sub-standard proportion of cement, sand and stone chips in the work performed by it. Thus no inference can be drawn against the petitioner on the basis of the Test Report from the National Test House, Kolkata that the petitioner had used sub-standard proportion of cement, sand and stone chips in the work performed by it. The submission of learned counsel for the respondent Railways that the petitioner had not challenged the validity of the samples earlier and has raised the issue for the first time before this Court can be of no avail as there is nothing to show that the said report was supplied to the petitioner. In any case even if the petitioner had failed to notice the serious lacuna in the said test certificate earlier, at a subsequent stage it would be open to the petitioner to point out before this Court such admitted fact on the face of the report and it would be difficult for this Court to accept any such test certificate based on samples which was without seal as per the report of the concerned test house itself. Thus it is not open to the respondents to have relied upon the said test report to give a finding on charge No.1. 11. It is evident on consideration of the three charges that it was charge No.1 alone which was based on completely objective standard and had the samples been sent to the laboratory in a sealed condition there could have been little scope for this Court to have interfered with the impugned order dated 8.7.2010 passed by the Railway Board; but on a consideration of the nature of the charges so far as the charge Nos. 2 and 3 are concerned and the materials on which the charge No.1 was held to have been proved it is evident that no reasonable man applying the Wednesbury Principle could have come to the conclusion so as to pass an order imposing such severe punishment against the petitioner. 12. The reliance placed by learned counsel for the respondent Railways on the Grosons Pharmaceuticals’s case (supra) appears to have no relevance as in that case the question was as to whether the blacklisted appellant before the Supreme Court had any right to be supplied materials on the basis of which the charges against the appellant were based. 12. The reliance placed by learned counsel for the respondent Railways on the Grosons Pharmaceuticals’s case (supra) appears to have no relevance as in that case the question was as to whether the blacklisted appellant before the Supreme Court had any right to be supplied materials on the basis of which the charges against the appellant were based. Moreover, the Apex Court took note of the fact that the entire record was summoned by the High Court and the High Court came to the conclusion that the impugned order had been passed after recording elaborate reasons in the file, the summary of which is contained in the impugned order. In the present matter the question is not as to whether there was any failure to supply material on which the charges were based rather that the material on which the respondents had relied upon was itself defective and unreliable in the sense that the report was based on the samples which were sent to the laboratory without seal. The only conclusion in such matter can be that the said report could not have been used as adverse evidence against the petitioner. 13. So far as the reliance on Tata Cellular case (supra) is concerned, the proposition laid down therein has little application the matter of blacklisting. Even in the said case it has been clearly laid down by the Apex Court that the decision taken by the administrative authorities has to be tested by the application of Wednesbury principle of reasonableness, including its other facets as pointed out in the said decision, and must be free from arbitrariness not affected by bias or actuated by mala fides. 14. In the present matter the respondents holding the charge No.1 as proved even though the report was based on samples which were found to be unsealed cannot be said to have complied with the said condition. The finding on the said charge No.1 is accordingly quashed. 15. Thus, on a consideration of the entire facts and circumstances, this Court is of the view that punishment award by the order dated 8.7.2010 on the basis of the remaining charges legally proved is disproportionate and therefore unsustainable. As a matter of fact the petitioner has already suffered for nearly one and three quarters year on the basis of the said order. As a matter of fact the petitioner has already suffered for nearly one and three quarters year on the basis of the said order. The order of banning/blacklisting shall accordingly cease to have any force with effect from today and it will not be open to the respondents to rely upon the said order for not considering the case of the petitioner in any tender process in which the petitioner was permitted to participate by this Court or in any future tender, etc. 16. The writ application is, accordingly, allowed to the extent stated above.