Orissa High Court
Chandan Singh vs State Of Odisha And Others ..... Opp. ... on 15 March, 2024
Author: B.R.Sarangi
Bench: B.R.Sarangi
ORISSA HIGH COURT: CUTTACK
AFR
W.P(C) NO. 20652 OF 2023
In the matter of an application under Articles 226 and 227
of the Constitution of India.
---------------
Chandan Singh ..... Petitioner
-Versus-
State of Odisha and others ..... Opp. Parties
For petitioner : M/s. Prabodha Chandra Nayak,
and R.K. Rout, Advocates.
For opp. parties : Mr. P.P. Mohanty,
Addl. Government Advocate
[O.P.1]
M/s. P.K. Bhuyan and
S. Mishra, Advocates
[O.Ps. 2 & 3]
P R E S E N T:
THE HONOURABLE DR. JUSTICE B.R.SARANGI AND THE HONOURABLE MR JUSTICE G. SATAPATHY Date of Judgment: 15.03.2024 DR. B.R. SARANGI, J. The petitioner, by means of this writ petition, seeks to quash the order dated 22.06.2023 passed by opposite party no.3 under Annexure-1 in blacklisting and Page 1 of 20 debarring the petitioner to participate in any tender of Water Corporation of Odisha and also to declare the decision making process of opposite party no.2 in blocking the portal registration under Annexure-7 as unreasonable, unfair and violative of Article 19(1)(g) of the Constitution of India.
2 The factual matrix of the case, in precise, is that the petitioner, who is a Degree Engineer Contractor, participated in the tender process, pursuant to Tender Call Notice No. WATCO (W)-14(2)/2023-24 dated 24.05.2023 and WATCO (W)-14(1)/2023-24 issued by opposite party no.3 for the work "Design, Construction, Testing & Commissioning of 1 No.5.00 Lakh Litre Capacity RCC ESR (25 MTR Staging) with All Ancillary work & Piping arrangement at LIC Colony under DMA-II for implementation of 24X7 Water Supply to Nimapara NAC." and "Design, Construction, Testing & Commissioning of 1 No. 5.00 Lakh Litre Capacity RCC ESR (25 MTR Staging) with all ancillary work and Piping Arrangement at Dibya Jiban Sangha under DMA-IV for implementation of 24X7 Water Supply to Page 2 of 20 Nimapara NAC". Even though the petitioner participated in such bidding process by submitting all the documents in e- tender process on 12.06.2023, his technical bid was rejected by the tender evaluation committee on 22.06.2023 and accordingly the petitioner received a mail that his ongoing work has been terminated and he has been blacklisted and debarred to participate in any tender of WATCO-opposite party no.3 on the ground of furnishing forged documents regarding experience certificate for the work in question. Hence, this writ petition.
3. Mr. P.C. Nayak, learned counsel appearing for the petitioner vehemently contended that blacklisting and debarment of the petitioner to participate in future tender of WATCO, without giving any opportunity of hearing and without complying the principle of natural justice, cannot be sustained in the eye of law. It is further contended that clause 6.25 of the DTCN stipulates that the blacklisting may be done as per the Appendix-XXXIV of OPWD Code which prescribes the modalities of blacklisting. It is further contended that Appendix-XXXIV of OPWD Code requires Page 3 of 20 that due inquiry has to be done after issuing show cause notice to the petitioner, but the same having not been complied with, the impugned order under Annexure-1 in blacklisting and debarring the petitioner to participate in any tender of WATCO in future, cannot be sustained in the eye of law. It is further contended that the action of opposite party no.2 in blocking the portal registration of the petitioner under Annexure-7, cannot also be sustained in the eye of law. In order to substantiate his contention, learned counsel for the petitioner has placed reliance on the judgment of this Court in the case of Raps Infratech Pvt. Ltd. v. State of Odisha and others, [W.P.(C) No. 19439 of 2023 decided on 11.08.2023, reported in Manu/OR/0992/2023], of which one of us (Dr. Justice B. R. Sarangi) was the author.
4. Mr. P.P. Mohanty, learned Addl. Government Advocate appearing for opposite party no.1-State contended that the matter relates to WATCO and, as such, the tender floating authority being opposite parties no.2 and 3, the State has no role to play. As such, if any action has been Page 4 of 20 taken by opposite parties no.2 and 3, the validity of such action is under challenge in the present writ petition.
5. Mr. P.K. Bhuyan, learned counsel appearing for opposite parties no.2 and 3-WATCO vehemently contended that the action taken by the authority is well justified, because the petitioner had forged the documents in the process of tender and when the same was detected during technical bid evaluation, the impugned action has been taken in blacklisting the petitioner. Consequentially no illegality or irregularity has been committed by the authority while passing the order impugned so as to call for interference by this Court at this stage.
6. This Court heard Mr. P.C. Nayak, learned counsel appearing for the petitioner; Mr. P.P. Mohanty, learned Addl. Government Advocate appearing for the opposite party no.1-State and Mr. P.K. Bhuyan, learned counsel appearing for opposite parties no.2 and 3 in hybrid mode and perused the records. Pleadings having been exchanged between the parties, with the consent of learned Page 5 of 20 counsel for the parties the writ petition is being disposed of finally at the stage of admission.
7. For a just and proper adjudication of the case, the relevant clauses of the tender documents as well as OPWD code are quoted hereunder:-
"6.25 Black Listing:
A Contractor may be blacklisted as per amendment made to Appendix XXXIV to OPWD Code Vol.-II on rules for black listing of Contractors vide letter No.3365 Dt.01.03.2007 of Works Department, Odisha. As per said amendment the Contractor may be blacklisted.
a) Misbehavior/threatening of Departmental & supervisory officers during execution of work/tendering process.
b) Involvement in any sort of tender fixing.
c) Constant non-achievement of milestones on insufficient and imaginary grounds and non-
adherence to quality specifications despite being pointed out.
d) Persistent and intentional violation of important conditions of contract.
e) Security consideration of the State i.e., any action that jeopardizes the security of the State.
f) Submission of false/ fabricated / forged documents for consideration of a tender."
"APPENDIX-XXXIV CODAL PROVISIONS FOR BLACKLISTING CONTRACTORS Page 6 of 20 A. The Chief Engineer of a department may blacklist a contractor with the approval of concerned Administrative Department on the following grounds.
a) Misbehavior/threatening of departmental and supervisory officers during execution of work/tendering process.
(b) Involvement in any sort of tender fixing.
(c) Constant non-achievement of milestones on insufficient and imaginary grounds and non-
adherence to quality specifications despite being pointed out.
(d) Persistent and intentional violation of important conditions of contract.
(e) Security consideration of the State i.e., any action that jeopardizes the security of the State.
(f) Submission of false/fabricated/forged documents for consideration of a tender.
The Divisional Officer shall report to the Chief Engineer if in his opinion any of the above wrong has/ have been committed by any contractor. On receipt of such a report from the Divisional Officer the Chief Engineer shall make due enquiry and if considered necessary, issue show cause notice to the concerned contractor who in turn shall furnish his reply, if any, within a fortnight from the date of receipt of the show cause notice. Therefore, if the Chief Engineer is satisfied that there is sufficient ground, he shall blacklist the concerned contractor with the approval of the Administrative Department. After issue of the order of blacklisting of the said contractor, the Chief Engineer shall intimate to all Chief Engineers of other Administrative Departments, the Registering Authority as provided under Rule 4 of PWD Contractor's Registration Rules, 1967 and Department of Information & Technology for publication in web site of State Government.
B. The registration certificate of blacklisted contractor shall remain automatically suspended while allowing him to complete all his ongoing work(s) unless otherwise rescinded by the competent authority on grounds of breach of conditions of agreement.
C. The name(s) of partners and allied concerns of the blacklisted contractors shall also be communicated to all concerned. Care shall be taken to Page 7 of 20 see that the contractor blacklisted and his partners do not transact any business with Government under a different name or title.
D. Once the blacklisting order is issued it shall not be revoked ordinarily unless:
(i) On review in later date, the Chief Engineer is of the opinion that there is sufficient justification to revoke the order of blacklisting, or
(ii) In respect of the same offense, the accused has been honourably acquitted by court of law.
The concerned Chief Engineer will obtain order from the concerned Administrative Department before revoking the order of blacklisting. The order of revocation shall also be communicated to all concerned.
E. The Chief Engineer and Administrative Department shall maintain a list of blacklisted contractor. Updated list of blacklisted contractors shall be communicated to all concerned by the Chief Engineers on a quarterly basis.
F. Checklist as per Annexure-I, shall be furnished by the concerned Chief Engineer for blacklisting the contractor.
G. Checklist as per Annexure-II, shall be furnished by the concerned Chief Engineer for revoking blacklisting order.
Explanation: (i) Action taken under this rule shall be in addition to any action taken under Rule 11 of PWD Contractor's Registration Rules,1967 (Appendix-VIII of OPWD Code, Vol.-II). On revocation of order of blacklisting, registration certificate of the contractor shall valid automatically, if not otherwise become invalid which shall be recorded in the registration certificate by the revoking authority.
(ii) The ground mentioned above for blacklisting of contractor shall be deemed to be deleted from the grounds for cancellation/suspension of registration certificate U/R-11(a) of PWD Contractor's Registration Rules, 1967 (Appendix VIII of OPWD Code, Vol.-II)." Page 8 of 20
8. The petitioner has assailed the office order dated 22.06.2023 passed by opposite party no.3 under Annexure- 1, which reads as under:-
"Whereas M/s Chandan Singh, 'A' Class Engineering Contractor, Indira Nagar Semiliguda, Koraput, has furnished forged documents regarding experience certificate for the following works 1) "Design, Construction, Testing & commissioning of 1 no. 5.00 lakh Litre capacity RCC ESR (25mtr staging) with all ancillary work & piping arrangement at Dibya Jiban Sangha under DMA-IV for Implementation of 24x7 water supply to Nimapara NAC" & "Design, Construction, Testing & commissioning of 1 no. 5.00 lakh Litre capacity RCC ESR (25mtr staging) with all ancillary work & piping arrangement at LIC Colony under DMA-III for Implementation of 24x7 water supply to Nimapara NAC" 2) "Construction of Intake well and pump house at Satnadhar Sundargarh for 24 X 7 and DFT water supply to Sundargarh Town'" and whereas his contract for the work "Construction of Intake well and pump house a Satnadhar Sundargarh for 24 X 7 and DFT water supply to Sundargarh Town" has been terminated, he is hereby black listed & debarred to participate in any tender of WATCO in future."
9. On perusal of the aforementioned office order, it is made clear that the petitioner has been debarred to participate in the bid and, as such, he has been blacklisted for indefinite period. Such blacklisting and debarment, which is for indefinite period, has been done without following the procedure envisaged in Appendix-XXXIV of OPWD Code, which provides a detailed procedure for Page 9 of 20 blacklisting of a contractor. Though under sub-clause (f) of Clause 6.25 it has been prescribed that the contractor may be blacklisted for submission of false/fabricated/ forged documents for consideration of a tender, but that should be after following the modalities prescribed under the OPDW Code. Nothing has been placed on record by the WATCO, by filing the counter affidavit, that the modalities have been followed for blacklisting the contractor. In absence of any modalities being followed in accordance with the terms and conditions of the contract itself, blacklisting of the petitioner for an indefinite period shows the arbitrary and unreasonableness exercise of power by opposite party no.3.
10. In Urusian Equipment & Chemicals Ltd. v. State of West Bengal, (1975) 1 SCC 70, the apex Court at Paragraphs-12, 19 and 20 held as follows:-
12. Under Article 298 of the Constitution the Executive power of the Union and the State shall extend to the carrying on of any trade and to the acquisition, holding and disposal of property and the making of contracts for any purpose. The State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal, protection of the laws.
Equality of opportunity should apply to matters of Page 10 of 20 public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The order of black- listing, has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of black- listing. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality.
xxx xxx xxx
19. Where the State is dealing with individuals in transactions of sales and purchase of goods, the two important factors are that an individual is entitled to trade with the Government and an individual is entitled to a fair and equal treatment with others. A duty to act fairly can be interpreted as meaning a duty to observe certain aspects of rules of natural justice. A body may 'be under a duty to give fair consideration to the facts and to consider the representations but not to disclose to those persons details of information in its possession. Sometimes duty to act fairly can also be sustained without providing opportunity for an oral hearing. It win depend upon the nature of the interest to be affected, the circumstances in which a power is exercised the nature of sanctions involved therein.
20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent, his case before he is put on the blacklist." Page 11 of 20
11. In UMC Technologies Private Limited v. Food Corporation of India and another, (2021) 2 SCC 551, the apex Court at paragraph-13 of the judgment observed that "at the outset, it must be noted that it is the first principle of civilised jurisprudence that a person against whom any action is sought to be taken or whose right or interests are being affected should be given a reasonable opportunity to defend himself."
12. As a prelude it may be apposite to say that an order of "blacklisting" has the effect of depriving a person of equality of opportunity in the matter of public contracts and by blacklisting a person, the State acts to the prejudice of a person and in such eventuality, such an action is to have support of legality. Thus, fairness and equality in State action is highly solicited.
The position regarding "blacklisting" as set at rest emanated from dicta of Courts is this, that:-
(i) Prior to taking decision to blacklist a contractor, which has adverse impact to carry on business as envisaged under Page 12 of 20 Article 19(1)(g) of the Constitution of India, the contractee-Government is required to adhere to the one of the statutory principles of natural justice, being "AUDI ALTERAM PARTEM";
(ii) At the time of evaluation of any entity of being blacklisted, doctrine of proportionality has weight;
(iii) If at all it is decided to "blacklist" an entity/contractor, the same cannot be "permanent";
(iv) Show-cause Notice inviting reply must show in clear terms the reason(s) based thereof and the person to be affected and/or against whom adverse civil consequences would ensue, has to be afforded adequate reasonable and effective opportunity to demonstrate his case/plight prior to decision to "blacklist" him is taken.
Nonetheless, with word of caution, there is no inviolable rule that a personal hearing of the affected party must precede every decision of the contractee-Government, vide, Patel Engineering Ltd. Vrs. Union of India, (2012)11 SCC 257.
Page 13 of 20
13. In Lt. Governor Delhi v. HC Narinder Singh, (2004) 13 SCC 342, though it relates to a service jurisprudence, the apex Court at paragraph-4 observed as follows:-
4. Reading of the show-cause notice suggests as if it is in continuation of the departmental proceedings.
Lack of devotion to duty is mentioned as the reason for the proposed action which was the subject-matter of the earlier proceedings as well. The second proposed action based on the same cause of action proposing to deny promotion or reversion is contemplated under the impugned show-cause notice. Second penalty based on the same cause of action would amount to double jeopardy. The Tribunal, was, therefore, right in law in annulling such an action. We are not expressing any opinion on the ambit or scope of any rule.
14. In Omax Engineering Works v. State of Haryana, MANU/PH/0459/2016 : 2016 (3) SCT 494, the High Court of Punjab and Haryana, at paragraphs 21 and 28 observed as follows:-
21. In our view, in a case such as this, where the second show cause notice is identical in every respect to the first show cause notice and where the first show cause notice was taken to its logical conclusion and the decision taken therein has attained finality, a second show cause notice is impermissible on the principle embodied in the Latin maxim 'interest reipublicae ut sit finis litium' and on the principle of cause of action/estoppel. These principles in turn are based on an important aspect of public policy.Page 14 of 20
28. The contention that the second impugned order is nothing but an additional order in respect of the first show cause notice requires merely to be stated to be rejected. The proceedings relating to the first show cause notice did not indicate that the issue of blcaklisting was not to be taken up or considered. Nor do the proceedings indicate any intention to deal with the issue of blcaklisting separately and/or subsequently. The record reveals that the first show cause notice was dealt with, considered and disposed of in its entirety without reserving any part or aspect thereof for further and/or separate consideration."
15. In Oryx Fisheries Pvt. Ltd. v. Union of India, MANU/SC/0921/2010 : (2010) 13 SCC 427, where reliance has been placed on Kranti Associates Pvt.. Ltd. V. Masood Ahmed Khan, MANU/SC/0682/2010 : (2010) 9 SCC 496, in paragraph-41 it was observed as follows:-
"41. In M/s Kranti Associates (supra), this Court after considering various judgments formulated certain principles in para 51 of the judgment which are set out below a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially.
b. A quasi-judicial authority must record reasons in support of its conclusions.
c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well.Page 15 of 20
d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power.
e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations.
f. Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies.
g. Reasons facilitate the process of judicial review by superior Courts.
h. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the life blood of judicial decision making justifying the principle that reason is the soul of justice.
i. Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants' faith in the justice delivery system.
j. Insistence on reason is a requirement for both judicial accountability and transparency.
k. If a Judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.
l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of Page 16 of 20 reasons or `rubber-stamp reasons' is not to be equated with a valid decision making process.
m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor (1987) 100 Harward Law Review 731-737).
n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553, at 562 para 29 and Anya vs. University of Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European Convention of Human Rights which requires, "adequate and intelligent reasons must be given for judicial decisions". o. In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of "Due Process".
16. In Gorkha Security Services v. Government of NCT of Delhi, MANU/SC/0657/2014 : AIR 2014 SC 3371, it has been held that blacklisting causes civil death. Such a grave consequence, therefore, attracts exercise of power of judicial review.
17. In Nova Steel (India) Ltd v. M.C.D. and Ors, AIR 1995 SC 1057 the apex Court held that the question of Page 17 of 20 blacklisting of the contracts has been considered by the Courts time and again and it has categorically been held that such order cannot be passed without giving opportunity of hearing to the party.
18. In Mr. B.S.N. Joshi & Sons Ltd v. Nair Coal Services Ltd. & Ors, (2006) 11 SCC 548 : AIR 2007 SC 437 and a long line of decisions, the ratio of that decision have been followed and applied principle of audi alteram partem to the process that may eventually culminate in the blacklisting of a contractor.
19. In TELSA Transformers Limited v. Odisha Power Transmission Corporation Limited, 2016 (II) ILR CUT-37, this Court also taking into consideration the ratio of Gorkha Security Services v. Government (NCT of Delhi), AIR 2014 SC 3371 held that merely because clause in notice inviting tender empowers the department to impose such penalty that does not mean that such penalty can be imposed without putting defaulting contractor to notice to this effect.
Page 18 of 20
20. In Isolators and Isolators v. Madhya Pradesh Madhya Kshetra Vidyut Vitran Co. Ltd., (2023) 4 SCR 445, it has been laid down that finality attaching to the action of cancellation cannot be read as a due notice for imposition of penalty even if the respondents chose to employ the expression 'cancelled with imposition of penalty' in the orders. If at all penalty was considered to be leviable, the same could not have been carried out without affording adequate opportunity of response to the appellant. It is, thus, held in the said case that the action of the respondents in imposing penalty without even putting the appellant to notice as regards proposed action could not be approved.
21. In Kulja Industries Limited v. Chief General Manager, Western Telecom Project Bharat Sanchar Nigam Limited and others, (2014) 14 SCC 731, the apex Court held, if State or its instrumentality takes decision on blacklisting then such decision is subject to judicial review on grounds of principles of natural justice, doctrine of Page 19 of 20 proportionality, arbitrariness and discrimination under Article 14 of the Constitution of India.
22. Applying the aforementioned principles of law laid down by the apex Court to the present case, the impugned orders of blacklisting under Annexure-1 dated 22.06.2023 and blocking of portal registration under Annexure-7 cannot be sustained in the eye of law and the same are liable to be quashed and are hereby quashed.
23. The writ petition is thus allowed. But, however, there shall be no order as to costs.
(DR. B.R. SARANGI)
JUDGE
G. SATAPATHY, J. I agree.
(G. SATAPATHY)
JUDGE
Orissa High Court, Cuttack
The 15th March, 2024, Arun
Signature Not Verified
Digitally Signed
Signed by: ARUN KUMAR MISHRA
Designation: ADR-cum-Addl. Principal Secretary Reason: Authentication Location: High Court of Orissa, Cuttack Date: 18-Mar-2024 17:04:25 Page 20 of 20