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2014 DIGILAW 210 (PAT)

Ajay Kumar Singh v. State of Bihar

2014-02-11

RAMESH KUMAR DATTA

body2014
ORAL ORDER I.A. No. 665 of 2007 & I.A.No.749 of 2007 Both these interlocutory applications have been filed for addition to the reliefs prayed for in the main writ application in view of the subsequent developments after the filing of the writ application which has led to the blacklisting of the petitioner, a direction for forfeiture of security and completion of the work by re-tendering at the risk and responsibility of the petitioner as also cancellation of his contract with all its consequential effects. Although I.A. No. 665 of 2007 was noticed by this Court and the impugned order of blacklisting dated 11.1.2007 was stayed, the interlocutory applications have not been formally allowed. 2. On a consideration of the facts and circumstances of the case, the prayers for addition of reliefs in the interlocutory applications are allowed. 3. I.A. No. 665 of 2007 and I.A. No. 749 of 2007 are, accordingly, disposed of. 4. Heard learned counsel for the petitioner and learned counsel for the State. 5. The writ application had originally been filed for a direction upon the respondents to allow the petitioner to complete the work after revising the rate of bitumen and other items since non-availability of the stone chips was caused due to ban imposed on the local Karwandia quarry by the State Government, and for other reliefs. However, after filing of the writ application the petitioner has been blacklisted and other adverse conditions have been imposed upon him by different impugned orders which have been assailed by filing the two interlocutory applications. It is admitted by learned counsel for the petitioner that with the passage of time the relief sought in the writ application for completion of the work has been overtaken by events and the only reliefs that the petitioner can be granted are quashing of the impugned order dated 11.1.2007 blacklisting the petitioner; the order dated 1.12.2006 forfeiting the security deposit and the direction to complete the work by re-tendering at the risk and responsibility of the petitioner, as also the order dated 29.1.2007 cancelling the contract. 6. 6. The facts of the case briefly stated are that pursuant to a tender notice the petitioner filed his tender on 5.10.2001 in which the petitioner was the lowest tenderer but the tender was finally approved only after substantial delay on 8/15.6.2002; the petitioner expressed his unwillingness at that stage to enter into the agreement claiming escalation of price in the meantime due to the delay on the part of the respondents. However, on the threatened pressure received from respondent No.5, the Executive Engineer, Rural Engineering Organization, Sasaram Division, Sasaram, Rohtas the petitioner ultimately entered into an agreement dated 3.8.2002. Apart from the terms and conditions of the agreement it was provided that the stone metal Grade III was to be obtained from Karwandia quarry to work site for which extra cost of carriage of materials by mechanical transport, i.e., Truck (8 M.T. capacity) including loading, unloading and stacking had been specifically provided in the agreement itself. Unfortunately at the relevant time the State Government directed the closure of the Karwandia mines as a result of which the petitioner and several other contractors could not complete the project. It is the specific stand of the petitioner that one similarly situated contractor Dwarika Singh, who had also been given contract for construction of roads under the Prime Minister Gram Sadak Yojna like the petitioner and on his being unable to complete the work whose contract was cancelled by the department with all its attending consequences, but thereafter on the representation of the said Dwarika Singh dated 10.2.2004 that because of the closure of the Karwandia quarry it had not been possible to obtain stone metal, the matter was recommended by letter dated 21.11.2005 of the Executive Engineer addressed to the Chief Engineer stating that in the said circumstances the order cancelling contract should be withdrawn and direction be issued that the agreement should be closed. Pursuant to the same the order of cancellation was withdrawn and the agreement of the said Dwarika Singh was closed/rescinded and no step was taken for blacklisting the said Dwarika Singh. Pursuant to the same the order of cancellation was withdrawn and the agreement of the said Dwarika Singh was closed/rescinded and no step was taken for blacklisting the said Dwarika Singh. Contrary to the same it is alleged that the respondents have acted in a biased and discriminatory manner with respect to the petitioner who is placed exactly in the identical situation as the other contractor Dwarika Singh and had submitted similar explanations but the respondents issued a show cause notice on 9.12.2006 as to why the petitioner should not be blacklisted in terms of Clause 13(ii) of the Bihar Contractors Registration Rules (1996). The petitioner filed the reply to the show cause on 9.1.2007 stating the entire facts and reasons as to why the work could not be done and as to how after reopening of the Karwandia quarry it could only be completed by giving the benefit of price escalation by revising the rates for which he had already filed the present writ application before this Court. The petitioner also referred to the fact of delayed payment made by the respondents from time to time of the different bills which also contributed to delay in the work. The petitioner also specifically referred to the case of Dwarika Singh showing the discrimination that the respondents have practiced with respect to the petitioner in identical situation. The petitioner in his reply further showed his readiness to complete the work provided the rates were revised and further prayed to accept the show cause with regard to blacklisting. However, by the impugned Resolution dated 11.1.2007 the respondents have blacklisted the petitioner. By an earlier order dated 1.12.2006 the respondents had already forfeited the security of the petitioner and directed that the work shall be completed by re-tendering at the risk and responsibility of the petitioner. By a subsequent letter dated 29.1.2007 of the Chief Engineer the contract of the petitioner was also cancelled and it was reiterated that he would not be permitted to participate in any tenders in future. Aggrieved by the same the petitioner has come to this Court. 7. By a subsequent letter dated 29.1.2007 of the Chief Engineer the contract of the petitioner was also cancelled and it was reiterated that he would not be permitted to participate in any tenders in future. Aggrieved by the same the petitioner has come to this Court. 7. Learned counsel for the petitioner submits that the respondents have acted in an arbitrary and discriminatory manner and have blacklisted the petitioner as also cancelled his contract by adopting double standards in the case of the petitioner vis-à-vis another contractor Dwarika Singh which he had specifically brought to the notice of the respondents but without whispering anything about the said Dwarika Singh, blacklisting order dated 11.1.2007 and the cancellation order dated 29.1.2007 have been passed by the respondents, which, according to learned counsel, is a violation of the principles of natural justice in the sense that the authorities have not considered the specific defence raised by the petitioner. 8. Learned counsel further submits that the respondents have also not applied their minds to the issue of closure of the Karwandia quarry, from which stone metals were to be obtained and carried to the site, by the State Government and thus it is submitted that for the action of the State respondents the petitioner could not be hauled up and made to suffer. 9. It is submitted that the other aspect of the matter has also not been considered in the blacklisting order and cancellation of contract except that reference has been made to certain clause of the tender notice that the contractor has to look into all aspects of the matter regarding the availability of the supply, etc. before he filed the tender. It is submitted that the same does not take into account any hardship caused by the action of the State respondents themselves as in the present matter Karwandia quarry was closed at the direction of the State Government. 10. It is lastly submitted by learned counsel that the blacklisting order could not have been passed for an indefinite period of time irrespective of the nature of misconduct, if any alleged and found, and the quantum of loss caused to the State Government. It is submitted that in the present matter the valuation of the contract was a little over Rs. It is submitted that in the present matter the valuation of the contract was a little over Rs. 1 crore and the loss to the State Government even on non-completion of the contract could not be held to be much, that too in circumstances that were beyond the control of the contractor and caused on account of the action of the State authorities themselves. 11. In support of his aforesaid proposition learned counsel for the petitioner relies upon a decision of the Apex Court in the matter of blacklisting, namely, M/s. Erusian Equipment and Chemicals Ltd. vs. The State of West Bengal and another : AIR 1975 SC 266 . 12. Learned counsel also refers to a decision of this Court in the case of M/s. NCC Ltd. & Anr. Vs. The State of Bihar & Ors. : 2013(1) PLJR 952 for the proposition that if the State authorities are themselves at fault in a particular matter then they cannot be permitted to decide the issue against the contractor and such issue can only be adjudicated by a court or an arbitral tribunal. 13. Learned counsel further relies upon a decision of this Court dated 10.1.2014 in CWJC No. 826 of 2013 in the case of Bholey Shankar Construction Pvt. Ltd. vs. The State of Bihar & Ors. for the proposition that normally blacklisting cannot be for an indefinite period of time as also the decision relied upon in the said case, namely, the decision of this Court dated 12.3.2013 in CWJC No. 276 of 2013 (M/s. Dayanand Prasad Sinha & Co. vs. The State of Bihar & Ors.); M/s. HCL Infosystems Limited vs. The Bihar State Electricity Board, Patna & Ors. : 2013(2) PLJR 753 as also the decision of the Apex Court in M/s. Kulja Industries Limited vs. Chief General Manager, W.T. Project, BSNL & Ors. : 2013(4) PLJR 447 . In M/s. Dayanand Prasad Sinha’s case (supra) this Court has held as follows : “Thus in the aforesaid view of the matter, this Court is not inclined to interfere with the blacklisting order. However, learned counsel for the petitioner submits that the blacklisting order itself cannot penalize a person for an indefinite period of time. : 2013(4) PLJR 447 . In M/s. Dayanand Prasad Sinha’s case (supra) this Court has held as follows : “Thus in the aforesaid view of the matter, this Court is not inclined to interfere with the blacklisting order. However, learned counsel for the petitioner submits that the blacklisting order itself cannot penalize a person for an indefinite period of time. There appears to be some force in the submission of learned counsel for the petitioner in that regard as by blacklisting a person suffers from serious civil consequences and normally it cannot be permitted to be awarded for an indefinite period of time. The respondent Engineer-in-Chief when passing the blacklisting order ought to have fixed the time limit for what period it will operate or at least given reasons for not doing so. In the present matter, no such explanation for not fixing the period of blacklisting is found. In my view in the given facts and circumstances of the case, the blacklisting order cannot be allowed to operate for an indefinite period. The matter would, therefore, have to go back to the Engineer-in-Chief for the limited purpose of fixing the period for which the blacklisting order will remain in operation.” 14. In M/s. HCL Infosystems case (supra) this Court has held in paragraph-31 and the second paragraph-31(sic) as follows: “31. Lastly, I also find that the order of blacklisting for two years is grossly disproportionate vis-à-vis the conduct of the petitioner company. It is true that the petitioner company, specially since it is registered with DGS & D, should not have refused to supply the materials under the contract at the DGS & D rates on which it had entered into. However, what has to be considered is the valuation of the deal and its consequence upon the business of the respondents. The contract was only for an amount of Rs.19 lacs and with respect to materials which are easily available in the market from other suppliers of the similar quality; the loss to the Board as urged by learned counsel for the petitioner would not have exceeded Rupees two-three lacs, if at all. The contract was only for an amount of Rs.19 lacs and with respect to materials which are easily available in the market from other suppliers of the similar quality; the loss to the Board as urged by learned counsel for the petitioner would not have exceeded Rupees two-three lacs, if at all. It is submitted by learned counsel for the Board that the Board has taken supply of the relevant materials from another party but no details have been brought on the record as to what extent loss has been incurred on account of alternative supply of materials by the other party. A mere breach of contract may not have very serious consequence on the public organization and consequently the public interest. In the case of Patel Engineering (supra) the financial loss on account of the action of the company before the Supreme Court was stated to be the tune of Rs. 3,077/- crores and in the said circumstances, the blacklisting order for a period of one year was held to be not disproportionate and justified. Compared with that case at best the Board should have taken recourse to the damage clauses already therein, if applicable, or should have been careful while entering into the agreement in a manner so that any damages arising out of the contract would have been quantified accordingly. 31. The extreme action of blacklisting at the drop of a hat, particularly when it is followed by the complete inability of the concerned party to do business with any other Public Organization, the Central or State Governments cannot be considered a fair action on the part of any authority which is State under Article 12 of the Constitution. In this regard, this Court may take judicial notice of the various terms and conditions stipulated in the Standard Bid Document of the State Government as also the Central Government which provides that in case of debarment and blacklisting by any other Government or public organization the tenderer becomes disqualified to participate in the tender process. Thus, the action of blacklisting has to be taken only as a last resort even when such power exists on account of the pervasive impact on the business of the concerned Corporation or firm. Thus, the action of blacklisting has to be taken only as a last resort even when such power exists on account of the pervasive impact on the business of the concerned Corporation or firm. The fundamental right of a person to carry on any business, occupation or trade conferred under Article 19(1)(g) of the Constitution cannot be lightly interfered with and it is now not merely a case of blacklisting by one organization confined to itself in view of the practice being followed by different State Governments and Public Organizations nationally. However, as held above in the absence of the constitutional power under Article 298 or similar statutory power, any action of a public body like the Electricity Board in the matter of blacklisting, even if exercised as being permissible in a rare case must remain confined to itself and cannot be used by other public authorities and bodies to disqualify a party.” 15. The Apex Court in M/s. Kulja Industries case (supra) has held in paragraphs 24 and 25 as follows : “24. Suffice it to say that “debarment” is recognized and often used as an effective method for disciplining deviant suppliers/contractors who may have committed acts of omission and commission or frauds including misrepresentations, falsification of records and other breaches of the regulations under which such contracts were allotted. What is notable is that the “debarment” is never permanent and the period of debarment would invariably depend upon the nature of the offence committed by the erring contractor. 25. In the case at hand according to the respondent-BSNL, the appellant had fraudulently withdrawn a huge amount of money which was not due to it in collusion and conspiracy with the officials of the respondent-Corporation. Even so permanent debarment from future contracts for all times to come may sound too harsh and heavy a punishment to be considered reasonable especially when (a) the appellant is supplying bulk of its manufactured products to the respondent-BSNL, and (b) The excess amount received by it has already been paid back.” 16. This Court after considering the aforesaid decisions has held in Bhole Shankar Construction Pvt. Ltd. case (supra) as follows : “The order is also bad on the count that it does not fix a period for which blacklisting is to operate. This Court after considering the aforesaid decisions has held in Bhole Shankar Construction Pvt. Ltd. case (supra) as follows : “The order is also bad on the count that it does not fix a period for which blacklisting is to operate. It is evident that the petitioner company is essentially engaged in road construction work and for a work of similar nature if at all it is found that the blacklisting is justified it would not be open to the respondents to permanently debar the petitioner from getting any contract under the State which, in terms of the SBD of the State Government and the practice followed by other public bodies in such matters in effect, amounts to debarring the petitioner from doing any work not only with the State but also for any public organization.” 17. Learned counsel for the respondents, on the other hand, has mainly sought to argue on the basis of the statements made in the counter affidavit that the contractor is himself liable for escalation of price of raw materials because he failed to complete the required work within the required period and since the execution of work did not exhibit requisite progress it was decided that for the work the agreement period of which has expired, the payment would be made only for the completed portion of the work. Learned counsel has also sought to rely upon the provisions to the similar effect contained in paragraphs 15 and 16 of the notice inviting tender. 18. It is further submitted by learned counsel for the State that under Clause 13(ii) of the Bihar Contractors Registration Rules, 1996 failure to complete the work as per the agreement makes the contractor liable for such punishment merely because in terms of the said clause the power has been conferred to the State authorities. 19. Learned counsel, however, is unable to state anything regarding the double standards adopted by the respondents in the case of the petitioner vis-à-vis the case of the other contractor Dwarika Singh with regard to which the facts stated in the pleadings of the petitioner have not been controverted. 20. I have considered the rival submissions of learned counsels for the parties. 20. I have considered the rival submissions of learned counsels for the parties. It is evident from the sequence of events stated above that the petitioner appears to be more a victim of circumstances that had arisen on account of certain action taken by the State respondents, namely, closure of Karwandia Mines. The issue is not that the same had been done rightly or wrongly but the fact that for the roads which were to be constructed the stones were to be obtained from the nearby Karwandia Mines within Rohtas district, which was part of the terms of the agreement and the rates were also accordingly fixed for the relevant period. It is not disputed that the mines got closed on account of the direction of the State Government making it practically impossible for the petitioner to complete the work in time. It is also not disputed that the petitioner had begun the work and had done some amount of work of repairing of roads and the entire earth work had been completed. Thus it could not be said to be a case where the petitioner could be held to be liable for the non-completion of the work or delay in its completion at least to go to the extent of even blacklisting the petitioner. As repeatedly emphasized by the Apex Court and this Court in various cases on the issue, some of which have been cited above that the order of blacklisting involves civil consequences and should not be passed at the drop of a hat whereas the respondent authorities are habitual in doing so. Even cancellation of contract has serious consequences upon the contractor but blacklisting goes much beyond and prevents a contractor from not only taking up work for the State but of Government of India and their undertakings which have made provisions in the clauses of Standard Bid Documents in that regard. Hence any order of blacklisting must be passed taking into account its effect upon the fundamental rights of a citizen to carry on his business and occupation under Article 19(1)(g) of the Constitution, and only in a case of gross misconduct or other gross conduct on the part of the contractor such power should be invoked. In the present matter, the respondents have clearly failed in supporting the blacklisting of the petitioner on the facts that have been placed on the record. 21. In the present matter, the respondents have clearly failed in supporting the blacklisting of the petitioner on the facts that have been placed on the record. 21. Moreover, from the action of the respondents itself it is evident that in identical circumstances they have not only withdrawn the order cancelling contract of another contractor Dwarika Singh but also closed/rescinded the contract absolving him from all consequences of non-completion of work, but without assigning any reason when the said plea has been taken by the petitioner in his show cause, on the contrary they have forfeited the security deposit of the petitioner and blacklisted the petitioner with all consequential adverse effects including completion of work by re-tendering at the risk and responsibility of the petitioner. Such discriminatory and arbitrary action of the respondents is reprehensible and they have completely failed to support the same before this Court. 22. This Court and the Apex Court have also held that an order of blacklisting cannot be passed for an indefinite period of time and the respondents even if they proceed to blacklist any contractor must ensure that the period of blacklisting is commensurate with the misconduct involved and/or the loss caused to the Government. 23. Thus, in the light of the aforesaid discussions, the writ application is allowed and all the impugned orders dated 11.1.2007, 1.12.2006 and 29.1.2007 are quashed. It is made clear that the contract shall be treated as closed and the re-tendering would not be at the risk and responsibility of the petitioner. The petitioner would, therefore, be entitled to consequential payment for the work done by him, including return of the security deposit, etc.