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2021 DIGILAW 820 (GAU)

Puja Carriers v. Indian Oil Corporation Ltd.

2021-12-20

DEVASHIS BARUAH

body2021
JUDGMENT : Devashis Baruah, J. 1. Heard Mr. S. Bandopadhyay, the learned counsel appearing for the Petitioner. I have also heard Mr. P. Bharadwaj, the learned counsel appearing for the Respondent Nos. 1 to 4. None appeared on behalf of the Respondent Nos. 5 & 6. 2. This is an application under Article 226 of the Constitution of India challenging the Show Cause Notice dated 29.11.2019 and the Suspension Notice dated 11.12.2019 issued by the Respondent No. 2. The basis issue in the instant writ proceedings is as to whether the action of the Respondent authorities, more particularly, the Respondent Nos. 1 to 4 in issuance of the show cause notice and the subsequent suspension order was illegal, arbitrary, unreasonable and unfair on the ground that the petitioner could not produce the authenticity certificate that the petitioner is a small enterprise under the Micro, Small and Medium Enterprises Development Act, 2006 (for short "the Act of 2006) in the format as directed by the Respondent No. 1 authority. 3. The brief facts of the instant case is that the petitioner is engaged in the business of transporting bulk LPG within India. The petitioner is registered as a small enterprise under the Act of 2006 and had been issued a certificate bearing No. WB10E0012250 by the Ministry of Micro, Small and Medium Enterprises, Government of India. The petitioner was issued a provisional letter of intent by the Respondent No. 1 on 08/11/2018 for the purpose of transportation of bulk LPG for the State of Assam. On 30/8/2019 the petitioner received an email from the Respondent/IOCL authority asking the petitioner to get the UAM number verified and authenticated (with a specific reference to the investments made by the petitioner's firm and showing that it is not crossing the ceiling limit of Rs. 2 crores) by the General Manager of District Industries Centre, Kolkata appointed under the Act of 2006 and submit the said verification/authentication report within a period of 10 days. It was made clear that if within the period of 10 days such verification/authentication of the petitioner's status is not changed to medium industry or UAM number is cancelled or process for said cancellation is initiated by the MSME authority, the respondent IOCL authorities would be constrained to take action as per the terms and conditions contained in the work contract agreement/tender document. 4. 4. Upon receiving the said email the petitioner took steps before the General Manager In-charge (Respondent No. 5) and issued a Communication to the Respondent No. 5 dated 5/9/2019 stating inter alia that the petitioner requires to get the UAM number verified and authenticated with a specific reference to the investment made by the firm and showing that it is not crossing the ceiling limit of Rs. 2 crores as the same is advised by the respondent IOCL authorities. On 9/9/2019 the petitioner informed the Respondent No. 3 that the petitioner had taken steps before the Respondent No. 5 and would submit the said verification report to the Respondent IOCL authorities once the same is issued by the Respondent No. 5. On 17/9/2019 the Respondent No. 4 issued an email to the petitioner, whereby the petitioner was required to take steps before the Respondent No. 5 for verification of the UAM number/MSE certificate under the provisions of the Act of 2006 and the certificate should be in the manner as stipulated in the said email. It was further made clear that if the verification/authentication certificate is not received by 25/9/2019 appropriate action shall be taken in terms with the work contract agreement/tender document. The petitioner immediately thereupon on 23/9/2015 issued a Communication to the Respondent No. 5 requesting the said authority to issue the certificate in terms with the format mentioned in the email dated 17/9/2019 issued by the Respondent No. 2. On 25/9/2019, the Respondent No. 4 was duly informed that such steps as directed in the email dated 17/9/2019 was taken before the Respondent No. 5 authority and the petitioner would furnish the said certificate immediately upon receipt from the MSME department. 5. On 1/10/2019 a show cause notice was issued to the petitioner to submit a written explanation within 10 days of the receipt of the said communication as to why the work order dated 8/11/2018 issued to the petitioner and the Bulk LPG Transportation Agreement dated 8/11/2018 signed with the petitioner under the MSME category shall not be cancelled/terminated and/or why any other deterrent action shall not be taken for irregularities committed by the petitioner. It was also mentioned that if a written response is not received within 10 days the Letter of Intent/Work Order/Bulk Transportation Agreement shall be cancelled/terminated in line with the terms and conditions of the tender, the agreement and the contractual law without giving any further notice to the petitioner. The petitioner immediately on receipt of the said Show Cause Notice issued an email dated 4/10/2019 enclosing the show cause reply and further stating that the verification process at the MSME department is under process. The petitioner further stated in the said reply that on account of Gandhi Jayanti and Durga Puja holidays, the office of the MSME Department would be closed till 15/10/2019 and thereafter the verification process would start and as such requested the Respondent IOCL authorities to grant further extension of time to the petitioner to submit the documents as sought for by the respondent IOCL authorities. 6. On 14/10/2019 the Respondent No. 3 issued a communication to the petitioner whereby the period to submit the verification or authentication report was extended by 24/10/2019. However, the petitioner on that day also could not submit the verification report and issued a communication dated 24/10/2019 requesting for further extension of time. Thereafter, on 25/10/2019 the petitioner issued an email to the Respondent No. 4 attaching thereto --(i) verified UAM certificate -- verification done by GMDIC and (ii) certificate received from Directorate of Micro, Small and Medium Enterprises, Office of the General Manager, District Industries Centre Kolkata in favour of Puja Carriers. It was also stated in the said email that the said two certificates would satisfy as regards the verification of the UAM No. WB 10E0012250. 7. The Respondent No. 3 on the very date i.e. 25/10/2019 issued a Communication stating that though the Respondent IOCL authorities have received the certificate dated 25/10/2019 from GM DIC Kolkata certifying that UAM No. WB 10E0012250 to be correct but the same is not as per the format provided by the IOCL authorities and directed the petitioner to obtain the certificate in the format provided in the letter of the IOCL authorities dated 14/10/2019 and the said verification should reach the respondent IOCL authorities before 12/11/2019 failing which action would be taken against the petitioner. 8. 8. The petitioner thereupon again issued another communication to the Respondent No. 6 requesting for issuance of the verification certificate as per the format requested by the Respondent IOCL authority. The facts as regards the request made to the Respondent No. 6 was also brought to the attention of the Respondent No. 4 vide a communication dated 8/11/2019 whereby the Respondent No. 4 was duly informed that steps in terms with the Communication dated 25/10/2019 have been duly taken before the concerned authority and that the petitioner would revert back to the Respondent IOCL authority once the information is received from the Director, MSME. 9. Thereafter, while the matter stood pending before the Respondent Nos. 5 & 6 as regards the request made to issue the verification certificate in the format as given by the Respondent IOCL authority a show cause notice was issued on 29/11/2019 asking the petitioner to show cause within 10 days as to why the petitioner's LOI/Work Order/bulk LPG Transportation Agreement should not be terminated in line with the terms and conditions of the tender, the agreement and the contractual law including forfeiture of the earnest money and the security deposit. The petitioner thereupon on 9/12/2019 issued a communication in reply to the email dated 29/11/2019 stating inter alia that the MSME department in Kolkata have issued the verification/authentication certificate as per their format/procedure and the said certificate was duly signed by the General Manager in Charge, District Industries Centre, Kolkata that "Udyog Aadhaar Memorandum No. WB10E0012250 submitted online on 27/3/2018 by M/S. Puja Carriers has been found correct. Third party users are requested to check the same by clicking "Verify UAM" in the portal Udyogaadhaar.gov.in." It was also stated that the Udyog Aadhaar Registration Certificate is available in the said portal and confers the "the Enterprise type" of the petitioner as "small". It was further stated that as per the direction of the Respondent IOCL authority the petitioner had duly taken steps before the Respondent Nos. 5 and 6 and it is the prerogative of the concerned Respondent No. 5 to issue the certificate as per the format they desire and the petitioners who are the only enterprises enrolled/registered and transporters cannot impose upon the said authority to issue the said certificate in the manner as directed by the Respondent IOCL authorities. 10. 5 and 6 and it is the prerogative of the concerned Respondent No. 5 to issue the certificate as per the format they desire and the petitioners who are the only enterprises enrolled/registered and transporters cannot impose upon the said authority to issue the said certificate in the manner as directed by the Respondent IOCL authorities. 10. To the said reply the respondent No. 2 issued the Communication dated 11/12/2019 thereby suspending all bulk LPG trucks (10 nos.) currently plying in the State of Assam and Meghalaya of the petitioner on the ground that the petitioner failed to produce the verification certificate as per the formant provided by the Respondent IOCL authorities. It is against that show cause notice dated 29/11/2019 and the suspension notice dated 11/10/2019 that the petitioner have approached this Court challenging the same to be illegal, arbitrary and unreasonable and thereby violating the rights of the petitioner under Article 14, 19 (1)(g), 21 and 300A of the Constitution of India. 11. The Respondent Nos. 1 to 4 have filed a joint affidavit-in-opposition whereby defending their action for issuance of both the show cause notice dated 29/11/2019 as well as the suspension order dated 10/12/2019. It is the specific case of the respondents that as the writ petitioner failed to provide the verification certificate as per the format provided by the IOCL Corporation in spite of being granted ample opportunities the impugned action taken by the respondent authorities was in terms with the tender as well as the contract agreement and as such no interference is called for in the instant case. 12. The petitioner thereupon filed an affidavit-in-reply to the affidavit-in-opposition of the Respondent Nos. 1 to 4 wherein in paragraph No. 9 of the said affidavit-in-reply a reference was drawn in respect to a similarly situated case before the Calcutta High Court and the order dated 24/8/2020 passed in MAT No. 491/2020 and the said judgment was enclosed as Annexure -1 to the affidavit-in-reply. It may be relevant herein to mention that the respondent No. 1 was party to the said proceedings. 13. The learned counsel for the petitioner submits that the Act of 2006 is an Act enacted for facilitating the promotion, development and enhancing the competitiveness of a Micro, Small and Medium Enterprises and for matters connected thereto. It may be relevant herein to mention that the respondent No. 1 was party to the said proceedings. 13. The learned counsel for the petitioner submits that the Act of 2006 is an Act enacted for facilitating the promotion, development and enhancing the competitiveness of a Micro, Small and Medium Enterprises and for matters connected thereto. He further submits that the said Act has been enacted for the purpose of registration as well as for regulating the Micro/Small and Medium Enterprises as defined in various sub-sections of Section 2 in terms with the classification as spelt out in Section 7(1) (a) (b) of the said Act. He submits that it is absolutely within the domain of the authority under the Act of 2006 to issue a certificate in the manner in which it proposes by fulfilling the terms and conditions of the said Act and no authority including the Respondent Nos. 1 to 4 can impose upon the petitioner to get a certificate or certification from the Respondent No. 5 & 6 in the manner sought for by the Respondent Nos. 1 to 4 and failing which coercive action is taken upon the petitioner. It is the specific submission of the petitioner that the authority under the MSME Act is the absolute authority under the said act and they are bound to act as per the said Act of 2006 and the Rules framed thereunder. He further submits that the petitioner is registered under the said Act of 2006 and has no power and control upon the Respondent Nos. 5 & 6 to impose upon them to issue a certificate in the manner as directed by the Respondent Nos. 1 to 4. This aspect of the matter having not been taken into consideration by the Respondent authority in issuance of the show cause notice as well as the suspension order have rendered the action of the Respondent authorities, more particularly the Respondent Nos. 1 to 4 illegal, arbitrary, unreasonable as well as unfair and consequential is in violation of Article 14, 19 (1)(g), 21 and 300A of the Constitution of India. 14. On the other hand, Mr. P. Bharadwaj, the learned counsel appearing on behalf of the Respondent Nos. 1 to 4 illegal, arbitrary, unreasonable as well as unfair and consequential is in violation of Article 14, 19 (1)(g), 21 and 300A of the Constitution of India. 14. On the other hand, Mr. P. Bharadwaj, the learned counsel appearing on behalf of the Respondent Nos. 1 to 4 submits that these actions are being taken by the Respondent IOCL authorities on the basis that various fake and fabricated certificates are obtained by the enterprises under the Act of 2006 by submitting false information as regards their investment and such certificate have been issued by authorities and on the basis of which such enterprises exemption of EMD and preferential allotment under the MSME category of bidders. It is also the case of the Respondent IOCL Authority that registration under the Act of 2006 is done on the basis of self-certification and as such it was essential for the petitioner to produce before the Respondent IOCL authorities the certificate in the manner and the format as directed by the respondent authorities from the Respondent Nos. 5 & 6 and the failure on the part of the petitioner to produce the said certificate in spite of various opportunities being granted to the petitioner, the respondent IOCL authorities were within their jurisdiction and authority to issue the show cause notice dated 29/11/2019 as well as the subsequent suspension order dated 11/12/2019 as per the terms and conditions of the tender documents as well as the contract agreement entered into. It was also submitted that the certificate if issued as per the format issued by the Respondent IOCL authority would amount to certification by the authority under the Act of 2006 about the petitioner's investment. It was also submitted that the Respondent Nos. 5 & 6 who are the authority entrusted with the duty to issue a certificate; the said authority has to verify the amount of investment made as it is on the basis of such investment made that an enterprise is classified as a medium, micro or small enterprise as the case may be. 15. I have heard the learned counsels for the Petitioner and the Respondent Nos. 1 to 4 as well as also perused the records. 15. I have heard the learned counsels for the Petitioner and the Respondent Nos. 1 to 4 as well as also perused the records. A perusal of the Act of 2006 would go to show that the said Act has been enacted for the purpose of promotion and development and enhancing the competitiveness of micro, small and medium enterprises. Section 2(n) (g) & (n) defines small enterprise, medium enterprise and micro enterprise on the basis of the classification as given in Section 7 of the said Act. A perusal of Section 7 of the said Act stipulates when an enterprise would be a micro enterprise, small enterprise and medium enterprise depending upon the investments it has made. Section 8 stipulates the manner in which a registration is be done and for doing so it is required that the said person and the enterprise shall file a memorandum with such authority as may be specified by the State Government under sub-section (4) or the Central Government under sub-section (3) of Section 8. Sub-section (2) of Section 8 stipulates the form of memorandum, the procedure of its filing and other matters incidental thereto as may be notified by the Central Government after obtaining the recommendation of the Advisory Committee as appointed under Section 7(2) of the said Act. In terms of sub-section (3) of Section 8 in the case of medium enterprise the memorandum has to be filed before the authority as notified by the Central Government. In terms of sub-Section (4) of Section 8 of the said Act, micro or small enterprises needs to file their memorandums before the authority as notified by the State Government. The manner in which the registration is to be carried out is in terms with the procedure notified by the Central Government. 16. In the instant case the petitioner claims to be a small enterprise and as such in terms of Section 8(4), the petitioner had applied before the Director Department of Micro, Small and Medium Enterprises, Government of West Bengal and on the basis of which the petitioner was issued a certificate marked as Annexure-1 to the writ petition. Whether the certificate has been issued properly or not is absolutely within the domain of the authority under Section 8 to verify and authenticate. The said certificate is to be issued by the said authority under the said Act of 2006. Whether the certificate has been issued properly or not is absolutely within the domain of the authority under Section 8 to verify and authenticate. The said certificate is to be issued by the said authority under the said Act of 2006. The contents of the said certificate should also be in terms with the procedure as laid down by the Central Government in terms of Section 8(2) of the Act of 2006. 17. The facts enumerated above would also go to show that the Respondent IOCL authority duly acknowledges the said aspect of the matter and as such, has been directing the petitioner time and again to obtain a certificate from the Respondent Nos. 5 & 6 or for that matter the authority under the Act of 2006. However, the Respondent Nos. 5 and 6 apart from issuing a certificate enclosed as Annexure-1 to the writ petition have also issued a certificate enclosed as Annexure-12 to the writ petition on 25/10/2019. Thereupon the facts would also go to show that the petitioner had been duly taking steps to get the certificate in the format as directed by the respondent IOCL authority from the Respondent Nos. 5 & 6. However, the Respondent Nos. 5 and 6 had not issued any such certificate as per the format directed by the Respondent Nos. 1 to 4. It is under such circumstances that the petitioner have been issued the show cause notice dated 29/11/2019 and the subsequent suspension order dated 11/12/2019. 18. A similar situation also arose before the Calcutta High Court whereby an order was passed in W.P.(C) No. 22865(W)/2019. The Single Judge of the Calcutta High Court perceiving that it was incumbent on the relevant DIC fixed the time within which the certificate would be issued by the DIC and set aside the show cause notice issued to a similarly situated enterprise like the petitioner herein and granting the liberty to the IOCL Authority for taking any fresh action upon the certificate being furnished by the writ petitioner therein to the IOCL authorities. 19. It may be relevant at this stage to mention that in the case before the Calcutta High Court only show cause notice was issued unlike in the instant case, the petitioner's contract has been suspended. 19. It may be relevant at this stage to mention that in the case before the Calcutta High Court only show cause notice was issued unlike in the instant case, the petitioner's contract has been suspended. Subsequent to the said order two applications were filed by the State of West Bengal and the writ petitioner therein seeking modification of the order dated 12/12/2019. In the said application filed by the State of West Bengal it was mentioned that it did not have the infrastructure or wherewithal to physically verify the assets and investments of every micro, small and medium enterprises. It was also contended by the State in their application that the invoice value and other particulars to demonstrate the extent of investment in a particular enterprise are required to be submitted by every enterprise to statutory authorities like the tax authorities, and as such, it was impossible for the said DIC to physically inspect into the assets and investments of every micro, small and medium enterprise. The Division Bench of Calcutta High Court by a judgment and order 24/8/2020 in the said matter observed that there is no doubt that an inquiry as to the veracity of the details and particulars furnished by an enterprise regarding its status as micro, small and medium enterprise has to be conducted by the relevant DIC and there is no escape from such obligation by the relevant DIC. It further observed that it was not possible for the DIC on account of lack of manpower or infrastructure to conduct the physical inquiry in every case. A standard operating procedure (SOP) has to be evolved by the State where an inquiry will be conducted as to the particulars furnished by a particular enterprise based on the details uploaded by the relevant enterprise on the website of other authorities; but in the odd case of, say, one in twenty or one in fifty there would be a physical verification. The Division Bench of the Calcutta High Court further observed in the said judgment as follows: "It is imperative that the credentials furnished by the enterprises be accurate and also be inquired into. Government contracts are being awarded on a preferential basis to a class of enterprises and persons who do not qualify to fall within such class must not be permitted to avail of such benefit. Government contracts are being awarded on a preferential basis to a class of enterprises and persons who do not qualify to fall within such class must not be permitted to avail of such benefit. Towards such end, the exercise undertaken by the appellant cannot be question. At the same time, merely because there is some suspicion in the air, it cannot be presumed that this writ petitioner had furnished erroneous details to obtain its certificate as a micro or small enterprise. Thus, the verification or inquiry by the relevant DIC becomes significant. The appellant will be entitled to take physical verification to verify the quantum of investment if the appellant finds any glaring error in the inquiry conducted by the DIC, it will be entitled to bring such perceived error to the notice of DIC for appropriate action in accordance with law. Thus, the relevant DIC in this case will physically verify the quantum of investment and other particulars which had been furnished by the writ petitioner at the time that it applied for its certification as a micro or small enterprise. The verification will be conducted on the basis of the rules that obtained at the time the application was made and not by the present rules. Upon conduct of such verification, the relevant DIC will call upon the writ petitioner to either amend its memorandum or cancel its memorandum or require it to take no action at all. However, a written communication in such regard must be issued by the relevant DIC to the writ petitioner within six weeks from date. For a period of eight weeks from date, no coercive action will be taken by the appellant to terminate the contract subsisting in favour of the writ petitioner. The writ petitioner will be obliged to forward the communication received from the relevant DIC, consequent upon the inquiry being conducted, within a week of receipt thereof to the appellant. The appellant will be entitled to take appropriate action thereupon in accordance with law." 20. The writ petitioner will be obliged to forward the communication received from the relevant DIC, consequent upon the inquiry being conducted, within a week of receipt thereof to the appellant. The appellant will be entitled to take appropriate action thereupon in accordance with law." 20. Additionally the Division Bench of the Calcutta High Court has also permitted the IOCL to conduct the physical verification to verify the quantum of investments of the petitioner's firm and if the IOCL authority found any glaring error initially conducted by the DIC it would be entitled to bring such perceived error to the notice of the DIC and to take appropriate action in accordance with law. It was also clarified that the said authority being granted to the IOCL to conduct physical verification would not amount to conferring any jurisdiction upon the IOCL authorities with the duties of the DIC but it is only to facilitate the DIC, if the occasion arises to arrive at a proper finding. 21. The facts of the instant case being similar to the facts which arose for consideration before the Division Bench of the Calcutta High Court save and except that in the instant case, the petitioner's operations have been suspended vide the impugned order dated 11/12/2019. On a pointed query to the counsel for the Respondent IOCL authority as regard what steps have the Respondent IOCL authority have taken in respect to the judgment dated 24/8/2020 of the Calcutta High Court, he fairly submits that the Respondent IOCL Authority have been taking steps as per the directions contained in the said judgment. Under such circumstances, I am of the view that it would be in the interest of justice that the observations made by the Division Bench of the Calcutta High Court in its judgment dated 24/8/2020 passed in MAT Case No. 491/2020 is also applied to the instant case with certain modifications in view of the suspension order dated 11/12/2019. Accordingly, I direct the Respondent No. 5 to verify the quantum of investment and other particulars which have been furnished by the writ petitioner at the time it applied for its certification as a small enterprise. The verification will be conducted on the basis of rule that was relevant at the time the application was made and not by the present rules. The verification will be conducted on the basis of rule that was relevant at the time the application was made and not by the present rules. Upon conduct of such verification, the Respondent No. 5 would call upon the writ petitioner to either amend its memorandum or cancel its memorandum or require it to take no action at all. However, written communication in such regard must be issued by the Respondent No. 5 to the writ petitioner within a period of 8 weeks from the date of receipt of a certified copy of the instant order. The petitioner would be obliged to forward the communication received from the Respondent No. 5 consequent upon the inquiry being conducted within a week thereof to the respondent IOCL authorities. Thereupon the respondent IOCL authorities would be entitled to take appropriate action as deemed fit in accordance with law. This Court further permits the respondent IOCL authorities to conduct physical verification to verify the quantum of investment of the petitioner's firm and if the respondent IOCL authority finds any glaring error in the verification made by the DIC, it would be entitled to bring such perceived error to the notice of the DIC to take appropriate action in accordance with law by also putting the petitioner into notice. This Court further makes it clear that the right given to the respondent IOCL authority to make physical verification to verify the quantum of investment of the writ petitioner should not be confused as conferring any jurisdiction to the IOCL Authority under the Act of 2006 but it is only to facilitate the DIC if the occasion arises to arrive at a proper finding. The Respondent IOCL Authority shall also be at liberty to serve a copy of the instant order to the Respondent No. 5 to ensure compliance to the above directions. 22. A direction to the petitioner to comply by the Respondent authorities to which the petitioner is not capable to comply as in the instant case, a direction to obtain a certificate from the Respondent Nos. 5 & 6 in the format asked by the Respondent IOCL Authority to which the petitioner has no control over the Respondent Nos. 5 & 6 and thereupon to take coercive actions for non-compliance renders such coercive actions unreasonable and arbitrary and thereby violates the mandate of Article 14 of the Constitution of India. 23. 5 & 6 in the format asked by the Respondent IOCL Authority to which the petitioner has no control over the Respondent Nos. 5 & 6 and thereupon to take coercive actions for non-compliance renders such coercive actions unreasonable and arbitrary and thereby violates the mandate of Article 14 of the Constitution of India. 23. The impugned show cause notice dated 29/11/2019 and the impugned suspension order dated 11/12/2019 is set aside and quashed in view of the observations made herein above with a liberty to the Respondent IOCL Authority to take such actions as deemed fit upon receipt of the verification certificate from the Respondent Nos. 5. The Respondent IOCL Authority shall also be at liberty to take back any benefit accruing upon the petitioner, if upon verification, it is found that the petitioner had obtained the certificate as a small enterprise on the basis of a false and misleading information from the Respondent No. 5. 24. With the above observations, the instant petition stands disposed. No costs.