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2019 DIGILAW 2297 (ALL)

S. H. Infratech Pvt. Ltd. v. State of U. P.

2019-09-30

ANIL KUMAR, SAURABH LAVANIA

body2019
JUDGMENT : 1. Heard learned counsel for the petitioners and learned Standing Counsel. 2. The present writ petition has been filed for the following relief’s: (i) to issue a Writ, Order or Direction in the nature of certiorari quashing the impugned order dated 13.6.2019 issued by the opposite party No. 3, as contained in Annexure 1 to the writ petition. (ii) to issue a Writ, Order or Direction in the nature of Mandamus commanding the opposite parties to allow the petitioners to continue to work as A-class contractor in the Lok Nirman Vibhag, U.P. 3. The brief facts of the case are to the effect that the petitioner-company was registered in Public Works Department as Class-1 Contractor vide order of opposite party No. 2 dated 14.10.1998 and the registration of the petitioner-company was renewed from time to time as per provisions of the Classification Enlistment of Contractors in the Public Works Department Rules, 1982 (hereinafter referred to as the "Rules, 1982") and the last renewal of the petitioner-company was made vide order dated 2.8.2018 and a registration certificate was issued vide letter No. 9227mt/Samnya Varg/54M-174.280, which is valid up to 30.6.2021. 4. A tender for construction work of Paved Shoulder including Strengthening from Km. 90.00 to 100.800 of NH 96 (New NH-330) in the State of Uttar Pradesh was published by the Lok Nirman Vibhag and the aforesaid tender was awarded to the petitioner-company. Thereafter, an agreement was executed on 28.2.2014 between the Superintending, Engineer, N.H. Circle, Lok Nirman Vibhag, Lucknow and the petitioner-company. As per agreement the work was required and be completed by 27.12.2014. 5. The time to complete/finalize the work was extended and when the work was about to be finalized, an inspection was done by the competent authorities i.e. Executive Engineer, Temporary Division (N.H.), Lok Nirman Vibhag, Sultanpur, Senior Divisional Accounts Officer, Temporary Division (N.H.), Lok Nirman Vibhag, Sultanpur and Assistant Engineer, Temporary Division.(N.H.), Lok Nirman Vibhag, Sultanpur and they, after looking and the work carried out by the petitioner-company of the contract, issued a certificate on 31.10.2017, thereby certifying that physical progress in work is 99% and only realization of contract is pending and the work done by petitioner-company is satisfactory. 6. 6. Thereafter, without final measurement, a notice was issued to the petitioner-company on 26.10.2018 by which the petitioner-company was asked to submit its explanation as to why the work has not been completed and why action should not be taken under Clauses-59.3(a) and (g) of Section-3 General Conditions of the contract and the same was replied on 28.10.2018. In reply dated 28.10.2018, it was categorically informed that the petitioner-company has completed the work and there is nothing incomplete and it was also mentioned, therein that because of transfer of the Superintending Engineer, the bills of the petitioner company have not been finalized and further prayed that after taking the final measurement, the bills of the petitioner company may kindly be finalized and be paid. 7. After submitting of reply dated 28.10.2018 to the show-cause notice, an office order was issued on 3.1.2019, thereby the contract agreement was terminated, under Clause-59 of General conditions of Contract on 4.1.2019 and the petitioner-company also came to know that the Bank Guarantee of Rs. 1.50 crore has been encashed. 8. Thereafter, petitioner-company approached the opposite party No. 1 vide letter dated 9.1.2019 specifically mentioned therein, that vide certificate dated 31.10.2017 the work under contract was found complete and satisfactory. 9. On 9.1.2019, another order was issued, by which after invoking Clause 60.1 of Section-3 of General Conditions of Contract, after adjusting the retention money as well as encasement of Bank Guarantee, a sum of Rs. 11,35,14,487/- was ordered to be deposited. The petitioner-company was also served with letter dated 2.3.2019, issued by the opposite party No. 4, asking the petitioner-company to deposit the amount mentioned in the order dated 9.1.2019. 10. The opposite parties have further proceeded to issue a show-cause notice dated 19.3.2019 in regard to black listing of petitioner-company as well as Directors. To the notice dated 19.3.2018, the petitioner-company submitted its detailed reply on 26.3.2019 in which it was also mentioned that the petitioner-company has completed 99% of work with satisfaction of the concerned authority and for which a certificate was issued on 31.10.2017 and as such order of black listing may be not passed. 11. Thereafter the petitioner-company have approached the opposite party No. 3 invoking the provisions of Clause 25.1 and 36 and requested for sending the matter to the Dispute Review Expert on 7.6.2019, as provided under para 36.1 of Section-1 of the contract agreement. 11. Thereafter the petitioner-company have approached the opposite party No. 3 invoking the provisions of Clause 25.1 and 36 and requested for sending the matter to the Dispute Review Expert on 7.6.2019, as provided under para 36.1 of Section-1 of the contract agreement. During the pendency of the application of petitioner-company dated 7.6.2019, the impugned order dated 13.6.2019, was passed, whereby the registration of petitioner company as a contractor in Lok Nirman Vibhag has been canceled and the petitioner-company has also been ordered to be black listed. 12. After receiving the order dated 13.6.2019, an appeal was preferred before the opposite party No. 2 on 26.6.2019, as provided under Rule 16 of the Rules, 1982, mentioning therein that without considering the reply as well as the fact that work under contract was completed by the petitioner, the impugned order dated 13.6.2019 has been issued thereby blacklisting the petitioner as well as cancelling the registration under the Lok Nirman, Vibhag, which is contrary to the provisions of Rules, 1982 as well as in violation of principles of natural justice. Appeal is pending consideration. 13. During the pendency of appeal, vide order dated 12.7.2019, passed by the opposite party No. 3, the application of petitioner-company dated 7.6.2019, to refer the matter to the Dispute Review Expert, was rejected on the ground of limitation. 14. It has also been pleaded that the petitioner-company send a legal notice dated 26.7.2019 for appointment of arbitrator of department after giving the name of arbitrator. The notice dated 26.7.2019 was sent through registered post on 29.7.2019. 15. In the aforesaid facts and circumstances the present writ petition, challenging, the order dated 13.6.2019 with consequential relief prayed for, has been filed. 16. The notice dated 26.7.2019 was sent through registered post on 29.7.2019. 15. In the aforesaid facts and circumstances the present writ petition, challenging, the order dated 13.6.2019 with consequential relief prayed for, has been filed. 16. Assailing the order dated on 3.6.2019 issued by the opposite party No. 3 the counsel for the petitioner submitted that without giving any notice to the petitioner, as has been provided under Rule-15(1) of the Classification & Enlistment of Contractors in the Public Works Department Rules, 1982, as amended from time to time and without considering the reply dated 26.3.2019 to the show-cause notice dated 19.3.2019, which was issued on the subject of black listing as well as the fact that petitioner completed 99% of work under the contract for which certificate dated 31.10.2017 was issued by the department the order dated 13.6.2019 has been passed and as such the same is liable to be interfered by this Court being passed in violation of principle of natural justice. 17. Learned counsel for the petitioners further submitted that the impugned order dated 13.6.2019, so far as it relates to blacklisting to the petitioner for indefinite period is concerned, the same is contrary to law settled by the Hon'ble Apex Court as well as this Court, as such the order of black listing is liable to be quashed. 18. In rebuttal the learned State Counsel submitted that against the order of cancellation of the registration, the petitioner-company has got the remedy to file an appeal under Rule 16 of Rules, 1998, which the petitioner-company has availed and being so the writ petition in regard to relief related to cancellation of registration is not maintainable. It is further stated that the order of black listing has been passed after giving show-cause notice to the petitioner. 19. Further submitted that the composite order dated 13.6.2019, whereby the registration of the petitioner-company has been cancelled and petitioner-company has been black listed, has been passed after considering the entire facts of the case and is a reasoned order and being so is not liable to the interfered. 20. Further submitted that petitioner-company failed to carry out its obligation as per agreement and for the said reason the order dated 13.6.2019 has been passed, which is just and proper and is not liable to be interfered. Prayer is to dismiss the writ petition. 21. 20. Further submitted that petitioner-company failed to carry out its obligation as per agreement and for the said reason the order dated 13.6.2019 has been passed, which is just and proper and is not liable to be interfered. Prayer is to dismiss the writ petition. 21. In reply, the learned counsel for petitioner submitted that order dated 13.6.2019 is a composite order and the petitioner-company has already filed an appeal against the order dated 13.6.2019, so far as it relates to cancellation of registration of petitioner-company, under Rule 16 of Rules, 1982 and in fact by means of present writ petition the petitioner has challenged black listing part of the order dated 13.6.2019, which is contrary to the principles settled, and as such the writ petition is maintainable and order dated 13.6.2019, so far as it relates to black listing of petitioner-company, is liable to be set aside/quashed. 22. Learned counsel for the petitioner placed reliance on the judgments of Apex Court passed in the case of Gorkha Security Services v. Government (NCT of Delhi) and others, (2014) 9 SCC 105 , and Kulja Industries Ltd. v. Chief General Manager, Western Telecom Project Bharat Sanchar Nigam Ltd. and others, (2014) 14 SCC 731 . Further, the reliance has also been placed on the judgment of Division Bench of this Court in the case of M/s. Vindhyawasini T. Transport v. State of U.P. and others, 2018 (4) ADJ 40 (DB). Relevant paragraphs are quoted here-in-under: "18. The question, then, arises as to what is the law regarding show-cause notice; whether show-cause notice seeking reply was sufficient or show-cause also required to carry details-of the intention of proposed action including period. 19. Court in Gorkha Security Services v. Government (NCT of Delhi) and others, (2014) 9 SCC 105 , has held that order of blacklisting is stigmatic in nature and debars such a person from participating in Government Tenders which means precluding him from the award of Government Contracts. While discussing necessity of serving of show-cause as reiterating principles of natural justice showing intention of proposed action, Court has held: "16. It is a common case of the parties that the blacklisting has to be preceded by a show-cause notice. Law in this regard if firmly grounded and does not even demand much amplification. While discussing necessity of serving of show-cause as reiterating principles of natural justice showing intention of proposed action, Court has held: "16. It is a common case of the parties that the blacklisting has to be preceded by a show-cause notice. Law in this regard if firmly grounded and does not even demand much amplification. The necessity of compliance with the principles of natural justice by giving the opportunity to the person against whom action of blacklisting is sought to be taken has a valid and solid rationale behind it. With blacklisting, many civil and/or evil consequences follow. It is described as "civil death" of a person who is foisted with the order of blacklisting. Such an order is stigmatic in nature and debars such a person form participating in Government tenders which means precluding him from the award of Government contracts." 20. Court further said: "21. The central issue, however, pertains to the requirement of stating the action which is proposed to be taken. The fundamental purpose behind the serving of Show-cause Notice is to make the noticee understand the precise case set up against him which he has to meet. This would require the statement of imputations detailing out the alleged breaches and defaults he has committed, so that he gets an opportunity to rebut the same. Another requirement, according to us, is the nature of action which is proposed to be taken for such a breach. That should also be stated so that the noticee is able to point out that proposed action is not warranted in the given case, even if the defaults/breaches complained of are not satisfactorily explained. When it comes to blacklisting, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action. 22. The High Court has simply stated that the purpose of show-cause notice is primarily to enable the noticee to meet the grounds on which the action is proposed against him. No doubt, the High Court is justified to this extent. However, it is equally important to mention as to what would be the consequence if the noticee does not satisfactorily meet the grounds on which an action is proposed. No doubt, the High Court is justified to this extent. However, it is equally important to mention as to what would be the consequence if the noticee does not satisfactorily meet the grounds on which an action is proposed. To put it otherwise, we are of the opinion that in order to fulfill the requirements of principles of natural justice, a show-cause notice should meet the following two requirements viz: (i) The material/grounds to be stated which according to the Department necessitates an action; (ii) Particular penalty/action which is proposed to be taken. It is this second requirement which the High Court has failed to omit. We may hasten to add that even if it is not specifically mentioned in the show-cause notice but it can be clearly and safely be discerned from the reading thereof, that would be sufficient to meet this requirement." 21. The comes the question whether blacklisting can be permanent. It is now well-settled law that blacklisting even if can be imposed against indisciplined deviant contractors for their acts of omission or commission, such blacklisting cannot be for all time to come. 22. In Kulja Industries Ltd. v. Chief General Manager, Western Telecom Project Bharat Sanchar Nigam Ltd. and others, (2014) 14 SCC 731 , Court has held: "20. It is also well-settled that even though the right of the writ petitioner is in the nature of a contractual right, the manner, the method and the motive behind the decision of the authority whether or not to enter into a contract is subject to judicial review on the touchstone of fairness, relevance, natural justice, non discrimination, equality and proportionality. All these considerations that go to determine whether the action is sustainable in law have been sanctified by judicial pronouncements of this Court and are of seminal importance in a system that is committed to the rule of law. We do not consider it necessary to burden this judgment by a copious reference to the decisions on the subject..." "25. 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. 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." 23. The aforesaid view has been reiterated in a recent judgment of B.C. Biyani Projects Pvt. Ltd. v. State of M.P. and others, 2017 (3) AWC 2840 (SC). 24. In view of law discussed above, and considering the recent authorities on the subject that debarment can never be permanent and period should invariably be mentioned in the order of debar, though it would depend upon the nature of defiance, breach or offence committed by erring person/Firm/Contractor, we find no hesitation in allowing writ petition partly and declare that impugned order dated 11.3.2015 will not be treated to be permanent debarment/blacklisting of petitioner. Respondent-Competent Authority, i.e., RFC, GKP shall pass a clarificatory supplementary order mentioning period of debarment of petitioner with regard to blacklisting pursuant to order dated 11.3.2015, looking to the nature of defiance, breach or offence committed by petitioner. This shall be done within one month from the date of production of a certified copy of this order." 23. We have heard the learned counsel for the parties and perused the record. 24. Considering the submission made by the learned counsel for the parties, we are taking up the issue of black listing of petitioner-company. We find from the record, particularly order dated 13.6.2019 and reply dated 26.3.2019 of the show-cause notice dated 19.3.2019 issued on the issue of black listing, that vide order dated 13.6.2019 the petitioner-company has been black listed for indefinite period and while passing the impugned order dated 13.6.2019 the reply of the petitioner-company dated 26.3.2019 has been rejected/ignored without giving reasons on the plea raised by the petitioner-company in reply dated 26.3.2019 to the show-cause notice dated 19.3.2019. Thus, taken into consideration aforesaid as well as settled principle of law and the facts of the present case that the petitioner-company has been blacklisted for indefinite period and order dated 13.6.2019 passed by opposite party No. 3 thereby blacklisting the petitioner-company for indefinite period is contrary to law, we are of the view that the order dated 13.6.2019, so far as it related to black listing of petitioner-company, is liable to be interfered. 25. So far as the matter in regard to the cancellation of registration of the petitioner is concerned, as per Rules 16 of Rules 1982, known as Classification and Enlistment of Contractors in the Public Works Department Rules, 1982, which reads as under the remedy of appeal is available to the petitioner-company, which has already been available, and as such we are not inclined to take up the issue of cancellation of registration of petitioner-company. "Rule-16 An application or enlisted contractor who feels aggrieved by any order passed under these rules, may file an appeal to the next higher authority within a period of one month of receipt of information of such order and the order passed by such authority after holding such enquiry as it may consider necessary, shall be final. Such appeals shall ordinarily be disposed off within a period of two months." 26. At this stage learned counsel for the petitioner made a prayer that appellate authority may kindly be directed to decide the appeal within some reasonable time. 27. For the forgoing reasons the writ petition is partly allowed. The order dated 13.6.2019, to the extent it relates to black listing of petitioner-company, is hereby quashed, the matter is remitted back to the competent authority/opposite party No. 3 to pass a fresh order on the issue of black listing of petitioner-company within four weeks from the date of receipt of certified copy of this order, and while passing the order the opposite party No. 3 would take note of the observation made by this Court, hereinabove, as well as the settled legal proposition. Appellate authority/opposite party No. 2 i.e. Engineer-in-Chief & Head of Department, Lok Nirman Vibhag, Nirman Bhawan, Lucknow is also directed to decide the appeal, if already not decided, expeditiously, say within four weeks from production of certified copy of this Order.