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2013 DIGILAW 382 (PAT)

Raj Roadways v. Union Of India through the Secretary, Department of Petroleum and Natural Gas

2013-03-18

RAMESH KUMAR DATTA

body2013
ORDER : Heard learned counsel for the petitioner and learned counsel for the respondent Hindustan Petroleum Corporation. Learned Central Government Counsel is also present. 2. The petitioner has filed the writ petition for setting aside the order dated 26.2.2013 issued by the Senior Regional Manager, Patna LPG, RO terminating LPG cylinder transportation contract agreement dated 4.1.2012 of the petitioner with effect from 15.3.2013 with punishment of forfeiture of security deposit of Rs.3,00,000/- and also further punishment of exclusion from future contract with Hindustan Petroleum Corporation Limited for a period of six months. 3. At the outset learned counsel for the petitioner submits that he is pressing the present writ application only with respect to the imposition of punishment of exclusion from future contract with Hindustan Petroleum Corporation Limited for a period of six months and for the rest of the order, he would be taking recourse to the arbitration clauses under the Contract. 4. The present matter is, accordingly, confined to the issue of blacklisting for six months and liberty is granted to the petitioner to invoke the arbitration clause for the decision on the other issues. 5. The petitioner had applied pursuant to a tender notice dated 10.11.2010 issued by the respondent Corporation for transportation of LPG cylinders for Purnea and Barauni LPG bottling plant. In his application, the petitioner had given a list of 23 trucks. One of the conditions of the tender was that the trucks should not be more than 12 years old as on 1.4.2011. The petitioner had provided registration certificates of all the trucks showing that they were all less than 12 years old on the stated date. The same was also verified and found correct by the officials of the respondent Corporation initially. The petitioner was selected as a Transporter of packed LPG Cylinders and an agreement was entered into between the petitioner and respondent No.5 on 4.1.2012 for a period of two years. 6. However, on a complaint being made it was found that one of the trucks bearing registration No.BR-13BG0009 submitted by the petitioner was actually having registration of 1996 and was more than 12 years old. 6. However, on a complaint being made it was found that one of the trucks bearing registration No.BR-13BG0009 submitted by the petitioner was actually having registration of 1996 and was more than 12 years old. Accordingly, a show cause notice dated 2.2.2013 was issued to the petitioner stating the aforesaid facts referring to clause 11 (v) of the Transport Agreement dated 4.1.2012 which provided that if at any time after executing the agreement any of the information furnished along with the tender was found to be false, the agreement was liable to be terminated and the security deposited shall be forfeited. The show cause notice further drew the attention to the agreement signed between the petitioner and the Corporation and also the tender documents. The petitioner was directed to show cause as to why necessary action should not be taken against him by the Corporation as deemed fit and in terms of the Transportation Contract Agreement dated 4.1.2012, integrity pact and the Policy Guidelines of the Corporation. The petitioner replied to the same stating that the said truck was taken on contract from the owner of the truck and was not belonging to him and he had relied upon the registration certificate supplied to him which was also found to be correct on verification at that stage by the officials of the respondent Corporation and thus he should not be held liable for the same. Since there was no specific show cause regarding blacklisting, the petitioner did not reply in terms to the same. 7. Learned counsel for the petitioner submits that there was no specific show cause of blacklisting the petitioner and thus the respondents have violated the principles of natural justice in blacklisting the petitioner under the show cause which was in general terms. It is submitted by him that even on a consideration of the provisions of the integrity pact, it is evident that the case of the petitioner does not come under Section 3 of the integrity pact under which the blacklisting could have been made. In any case, it is submitted that unless specific show cause had been issued with regard to blacklisting the petitioner by referring to the specific provisions of the integrity pact which made the petitioner liable for exclusion from future contract, the petitioner could not have been blacklisted by issuance of general show cause. 8. In any case, it is submitted that unless specific show cause had been issued with regard to blacklisting the petitioner by referring to the specific provisions of the integrity pact which made the petitioner liable for exclusion from future contract, the petitioner could not have been blacklisted by issuance of general show cause. 8. Learned counsel for the respondent Corporation, on the other hand, submits that in terms of Section 3 of the integrity pact it was open to the respondents to have disqualified the petitioner from tender process and exclude him from future contract of the Corporation and thus there is nothing wrong with the action of the respondents. 9. On a consideration of the rival submissions of learned counsels for the parties, this Court is of the view that the punishment of blacklisting is not the only penalty provided under the integrity pact. It also provides for compensation for damages, including liquidated damages equivalent to Security Deposit/Performance Bank Guarantee as also termination of contract. It is, thus, evident that the mere reference to the same does not mean that the respondents intended to blacklist the petitioner as nothing had been found against the other 22 trucks provided by the petitioner and only with respect to one it was clearly found that the same was more than 12 years old. The tender notice only provided that any falsification of document pertaining to any offered truck if detected during scrutiny of the documents or after finalization of the contract, will lead to rejection of contract and forfeiture of EMD/Security Deposit of that particular truck and no replacement shall be allowed for that truck. The said condition was, however, magnified under clause 11 (v) of the Transportation Contract Agreement dated 4.1.2012 that if at any time after executing the said agreement any of the information furnished along with the tender was found to be false, the agreement was liable for termination and the security deposited shall be forfeited, whereas in the impugned order the matter has been taken still further to take it within the terms of the so-called integrity pact and not only to forfeit the EMD of the security deposit but to forfeit the entire security deposit, terminating the agreement and also blacklisting the petitioner. The question is as to whether if the tender conditions provide that in case of any falsification of document pertaining to any offered truck if detected during scrutiny of the document or after finalization of the contract it will lead to rejection of contract and forfeiture of EMD/Security Deposit of that particular truck, by taking recourse to the general conditions indicated in clause 11 (v) of the Contract it can also terminate the contract and forfeit the entire security deposited. Not only that the effect has been still magnified by clubbing the same with the integrity pact so as to not only lead to termination of contract and forfeiture of entire security deposit but to even blacklisting the petitioner for a period of six months. 10. Since the matter is not being pressed on the question of validity of the action of the respondents with respect to termination of agreement and forfeiture of the entire security deposit, for which the petitioner intends to invoke the arbitration clause but it is a serious matter that a clause which only provided rejection of contract and forfeiture of EMD/Security Deposit of a particular truck can be expanded so as to lead even to blacklisting the petitioner. Blacklisting is something which causes civil consequences to the person concerned and it ought to be imposed by taking into consideration all aspects of the matter. At the very least it is required of the concerned State or public sector organization to bring it to the notice of the concerned contractor if their intention is to blacklist also. The show cause is silent on that point, except to refer to the integrity pact under which the blacklisting is to be done. Section 3 of the integrity pact itself refers to Section 2 which relates to various actions in the nature of corruption and criminality only accompanied by a general statement regarding transgression through a violation of Section 2 or any other form such as to put the reliability or credibility as a contractor into question, in which case the Corporation is entitled to disqualify the contractor from the tender process or to terminate the contract if already signed for such reason. It is thus evident that no specific show cause on the question of blacklisting has been issued and therefore it was not open to the respondent Corporation to have passed an order of blacklisting against the petitioner. 11. In the aforesaid view of the matter, the writ application is allowed to the extent it is pressed with regard to exclusion of the petitioner from future contract with the respondent Corporation for a period of six months by quashing the order dated 26.2.2013 to that extent. It would, however, be open to the respondents if they intend to proceed to take action of blacklisting against the petitioner to issue specific show cause for that before they take further steps in the matter. It is made clear that any such action must take into account the law as clarified by this Court in the present order considering the fact that it inflicts serious civil consequences on the party concerned and is to be imposed only where the charges are of a very grievous nature such as mentioned in clause 2 of the integrity pact itself. 12. So far as the remaining part of the impugned order dated 26.2.2013 is concerned, it shall be open to the petitioner to challenge the same in arbitration proceedings under the contract.