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2014 DIGILAW 44 (PAT)

Bholey Shankar Construction v. State of Bihar

2014-01-10

RAMESH KUMAR DATTA

body2014
ORDER 1. Heard learned counsel for the petitioner and learned counsel for the State. 2. The petitioner seeks quashing of the office order dated 3.12.2012 issued by the Engineer-in-Chief, Rural Works Department, Government of Bihar by which he has blacklisted the petitioner-company. 3. The petitioner being the lowest bidder with respect to construction of PCC road under plan Anugrah Narayan Road to Sarsauli for a length of 218 meters for an amount of Rs. 9,71,019/-, claims to have completed the works in a proper manner. It is the stand of the petitioner that there being water logging on the portion of the road to be constructed in which heavy potholes had developed at most of the places the petitioner had to first fill up and cover up the potholes and only thereafter it was made fit for laying of PCC and the work of the petitioner was found to be proper as per the specification and estimate made on the basis of supervision carried out by the departmental Engineers and the payments were also made to the petitioner of the entire amount. Subsequently on a complaint made by a local political person with respect to the quality of work, a flying squad of the department inspected the same in the absence of the petitioner; as a matter of fact, it is alleged that even the Executive Engineer, Assistant Engineer and the concerned Junior Engineer were not present at the time of inspection so as to explain shortage with regard to the work. However, on the basis of the said report of the flying squad a show cause was sought from the petitioner by letter dated 20.7.2012 to which the petitioner replied on 8.11.2012. Thereafter by his impugned order dated 3.12.2012 the Engineer-in-Chief, Rural Works Department has blacklisted the petitioner. 4. Learned counsel for the petitioner principally makes two submissions for assailing the said order. It is firstly submitted by learned counsel for the petitioner that the order of blacklisting is cryptic and does not deal with the reply to the show cause submitted by the petitioner but merely dismisses the same stating that on consideration the same was not found to be satisfactory which shows complete non-application of mind by the Engineer-in-Chief in the matter. 5. 5. It is further submitted by learned counsel that the blacklisting order could not have been passed for indefinite period of time moreso keeping in view the fact that the value of the work was less than Rs.10 lacs and the alleged loss, if any, to the respondents State would be quite nominal. In support of the same learned counsel relies upon a decision of this Court dated 12.3.2013 passed in CWJC No. 276/2013 (M/s. Dayanand Prasad Sinha & Co. Vs. The State of Bihar & ors.) in which it has been 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.” 6. Learned counsel further relies upon a decision of this Court in the case of M/s. HCL Infosystems Limited Vs. The Bihar State Electricity Board, Patna & Ors.: 2013(2) PLJR 753 , in para 31 and the second para-31(sic) of which it is held 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. 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. 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. 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. 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.” 7. Learned counsel also refers to the decision of the Supreme Court in the case of M/s. Kulja Industries Limited Vs. Chief General Manager, W.T. Project, BSNL & Ors.: 2013 (4) PLJR 447 , in paras 24 and 25 of which it has been laid down 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. 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.” 8. Learned counsel for the State is unable to support the order as having been passed on a proper application of mind by the Engineer-in-Chief. 9. This Court on perusal of the blacklisting order, is in agreement with the submission of learned counsel for the petitioner. It is evident from the said order that there has been no application of mind either to the facts involved or to the reply to the show cause filed by the petitioner by the Engineer-in-Chief before passing of the said order. The principles of natural justice are not mere formality which can be held to be complied by merely issuing show cause notice and thereafter passing the order without any consideration of the reply filed pursuant to the same. Such action or conduct of the respondent-authorities would equally amount to violation of the right to audi alteram partem. The order clearly shows non-application of mind to the reply to the show cause filed by the petitioner. 10. 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. 11. Thus, in the light of the aforesaid discussions, the writ application is allowed. 11. Thus, in the light of the aforesaid discussions, the writ application is allowed. The impugned order dated 3.12.2012 of the Engineer-in-Chief, Rural Works Department is quashed and the matter is remanded to the Engineer-in-Chief to pass a fresh order in accordance with law. 12. It is submitted by learned counsel that the petitioner has already suffered debarment for a period exceeding one year on account of the blacklisting. In my view, on the allegations made, blacklisting ought not to exceed the period for which the petitioner has already been blacklisted. Therefore, the remand is only for the purpose of consideration as to whether an order of blacklisting is to be passed but the effect of any such order would remain confined to the period for which the petitioner has already remained blacklisted.