Punjab-Haryana High Court
M/S Rs Labour And Transport Contractor vs Food Corporation Of India And Ors on 6 March, 2017
Bench: S.J. Vazifdar, Anupinder Singh Grewal
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
Civil Writ Petition No.21863 of 2016 (O&M)
DATE OF DECISION: 06.03.2017
M/s R.S. Labour and Transport Contractor .....Petitioner
versus
Food Corporation of India and others .....Respondents
2. Civil Writ Petition No.21864 of 2016 (O&M)
M/s R.S. Labour and Transport Contractor .....Petitioner
Versus
Food Corporation of India and others .....Respondents
CORAM:- HON'BLE MR.JUSTICE S.J. VAZIFDAR, CHIEF JUSTICE
HON'BLE MR. JUSTICE ANUPINDER SINGH GREWAL
Present: Mr. Akshay Bhan, Senior Advocate with
Mr. Abhishek Sanghi, Advocate for the petitioners
Mr. K.K. Gupta, Advocate for respondent Nos.1 and 2
Mr. Gaurav Chopra, Advocate for respondent No.3
..
S.J. VAZIFDAR, CHIEF JUSTICE :
1. It is not only convenient but necessary to consider both these petitions by a common order and judgment.
2(A) In CWP No.21863 of 2016, the petitioners have sought a writ of certiorari to quash the Technical Bids Evaluation Summary dated 10.10.2016 of the committee constituted by respondent No.1 rejecting their technical bid on the ground and with the remark:
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"Cartelisation B/W R S Labour and Transport Contractor & Sushil & Co.". The petitioners have also challenged a communication dated 10.10.2016 addressed by the official respondents informing the petitioners of this decision and that the earnest money deposited (EMD) by them was forfeited.
(B) In CWP No.21864 of 2016, the petitioners have sought an order quashing the Technical Bids Evaluation Summary dated 10.10.2016 by which the petitioners' technical bid was rejected by the committee. The rejection was on account of the forfeiture of the petitioners' EMD in the above matter and a term in the tender documents disqualifying a bidder whose EMD is forfeited in any other contract by respondent No.1.
(C) In both the petitions, the petitioners have challenged the award of the work in favour of respondent No.3 and have sought a writ of mandamus directing respondent Nos.1 and 2 to consider their technical bids and to allot the tenders in accordance with law. Respondent No.3 in CWP No.21863 and 21864 of 2016 are one Gaurav Kumar and Shiva Transport Co., respectively.
3. The official respondents have not contended that the petitioners' bids were not technically qualified for any other reason.
4. The official respondents issued an e-Notice dated 30.09.2016 inviting tenders for the appointment of a Mandi Transport Contractor for the Dhamtan, Kharal, Jind and Safidon Mandis in the Jind district, Haryana. In respect of this tender, the petitioners submitted their bid as a Mandi Transport Contractor only for the Jind Mandi.
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On 30.09.2016, the official respondents also issued an e-Tender Notice for the appointment of a Mandi Labour Contractor for Safidon Mandi in district Jind. The petitioners submitted a bid for the same.
5(A) The tender notice, inter alia, states:-
"List of Documents to be uploaded in Technical bid folder/cover:
Technical Bid as per Appendix II:
...... ..... ..... ...... ...... ...... .......
PRICE BID to be uploaded in Financial bid folder/cover:
(i) Signed scanned copy (in pdf format) of Price Bid/Offered rate as per Appendix-III.
NOTE:-For detailed terms and conditions, MTC MTF applicable may be referred."
We have proceeded on the basis that the detailed terms and conditions of the Model Tender Form (MTF) are applicable. The following clause of the MTF was relied upon by the respondents:-
"Clause 12: In case of any clear indication of cartelization, the Corporation shall reject the tender(s), and forfeit the EMD."
(B) The petitioners' bid for being appointed a Mandi Transport Contractor in respect of the Jind Mandi was rejected on the ground that they had formed a cartel with another party and that their bid was, therefore, liable to be rejected in view of clause 12 of the MTF. This decision is challenged in CWP No.21863 of 2016.
6. Appendix-II of the e-Tender Notice pertains to the "TECHNICAL BID". Clause (iii) thereof stipulates the "TECHNICAL EXPERTISE". Sub-clause 5(ii) of clause (iii) contains the following note:-
"5. DETAILS OF SISTER CONCERNS 3 of 16 ::: Downloaded on - 11-03-2017 15:23:12 ::: CWP-21863-2016, etc. - 4 -
....... ......... ........... ....... ......... ......... ....... ...... ..... ....... NOTE:
....... ......... ........... ....... ......... ......... ....... ...... ..... .......
(ii) The parties whose EMD is forfeited by FCI will not be qualified."
The official respondents considered the petitioners to be ineligible to bid for the Mandi Labour Contractor tender on the basis of this clause and in view of the petitioners' EMD having been forfeited by the first respondent in respect of the other tender for the Mandi Transport Contractor for the Jind Mandi. This decision is challenged in the second petition viz. CWP No.21864 of 2016.
7. The above terms and conditions are the same in both the e-Tender Notices. Respondent No.3 in CWP No.21863 of 2016 Gaurav Kumar, who also submitted a tender, addressed a letter dated 06.10.2016, which stated the following: Of the four bidders the petitioners and M/s Sushil & Co. "submitted the tender under cartelization". One Raj Singh is a partner in and the constituted attorney of the petitioners and another firm by the name of M/s Shree Shyamji Transport Co. Raj Singh submitted the tender as a partner and constituted attorney of the petitioners. On behalf of M/s Shree Shyamji Transport Co., he also entered into an agreement with M/s Sushil & Co. for the supply of trucks to M/s Sushil & Co. for the transport work. In CWP No.717 of 2015, filed by the petitioners, Raj Singh stated that he is the caretaker of M/s Sushil & Co. These facts established that the petitioners and M/s Sushil & Co. had formed a cartel for the purpose of bidding in the present case. Respondent No.3 requested the first respondent to invoke clause-12 and to reject the tenders submitted by the petitioners and M/s Sushil & Co. as they formed a cartel.
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The agreement that is referred to in the above letter is dated 09.02.2016 and was entered into between Sushil Bansal (the sole proprietor of M/s Sushil & Co.) and M/s Shree Shyamji Transport Co. M/s Shree Shyamji Transport Co. agreed to provide a minimum of 80 trucks daily as demanded by M/s Sushil & Co. for the purpose of transporting foodgrains and stock articles at the rates and on the terms and conditions to be agreed upon. The agreement was to remain in force till 01.04.2016.
8. An agreement dated 22.01.2016 was also entered into between the petitioners and the Sonepat Truck Owners Union. The parties agreed that in the event of the petitioners being awarded a contract by any government or semi-government agency in Haryana, the Union would make available a minimum of 150 trucks per day to the petitioners.
There can be no objection to this agreement for it is, in fact, pursuant to and in furtherance of any contract that may be awarded in favour of the petitioners. Even in the present case, the agreement itself contemplates that the bidders can obtain trucks from the Union. Thus, even absent the agreement the Union could have provided the petitioners the trucks. Moreover, there is no connection between the Sonepat Truck Owners Union and the petitioners.
9. As noted earlier, the official respondents, by the letter dated 10.10.2016, informed the petitioners that at the technical bid evaluation of the Mandi Transport Contract tender the committee observed: ".... ... that there is case of cartelisation"
between the petitioners and M/s Sushil & Co. which is illegal. The letter stated that in view thereof the official respondents had 5 of 16 ::: Downloaded on - 11-03-2017 15:23:12 ::: CWP-21863-2016, etc. - 6 -
decided to forfeit the earnest money deposited by the petitioners. This is all that the letter states. Although the letter does not state so specifically, the petitioners' tender was also not considered for the same reason. There is no explanation as to what exactly the official respondents understand by the term "cartelisation". Nor is there any indication in the letter as to the basis on which the official respondents came to the conclusion that the petitioners and M/s Sushil & Co. formed a cartel.
10. The Technical Bid Evaluation Summary also merely states against the name of the petitioners: "Cartelisation B/W R S Labour and Transport Contractor & Sushil & Co.". The Technical Bid Evaluation Summary also does not discuss the term "cartelisation". Nor does it indicate the basis on which the conclusion had been arrived at.
11. Thus far, therefore, in CWP No.21863 of 2016, the position is that the petitioners' bid in respect of the Jind Mandi in district Jind was rejected on the ground that they had formed a cartel with M/s Sushil & Co. The first respondent, in effect, debarred/blacklisted the petitioners from participating in the tender process. The forfeiture of the EMD was in view of the blacklisting. This, therefore, is not a case where the EMD is forfeited on the ground of a breach of the contract or the failure to perform a part thereof. This is a case where the party is prevented/debarred from being considered for the contract itself.
12. The prejudice caused by blacklisting a party and the procedure to be followed before blacklisting a party has been dealt with in several judgments. It is sufficient to refer to paragraph- 17 of the judgment of the Supreme Court in M/s Kulja Industries 6 of 16 ::: Downloaded on - 11-03-2017 15:23:12 ::: CWP-21863-2016, etc. - 7 -
Limited vs. Chief General Manager, Western Telecom Project Bharat Sanchar Nigam Limited and others, (2014) 14 Supreme Court 731 which reads as follows:-
"17. That apart, the power to blacklist a contractor whether the contract be for supply of material or equipment or for the execution of any other work whatsoever is in our opinion inherent in the party allotting the contract. There is no need for any such power being specifically conferred by statute or reserved by contractor. That is because "blacklisting" simply signifies a business decision by which the party affected by the breach decides not to enter into any contractual relationship with the party committing the breach. Between two private parties the right to take any such decision is absolute and untrammelled by any constraints whatsoever. The freedom to contract or not to contract is unqualified in the case of private parties. But any such decision is subject to judicial review when the same is taken by the State or any of its instrumentalities. This implies that any such decision will be open to scrutiny not only on the touchstone of the principles of natural justice but also on the doctrine of proportionality. A fair hearing to the party being blacklisted thus becomes an essential precondition for a proper exercise of the power and a valid order of blacklisting made pursuant thereto. The order itself being reasonable, fair and proportionate to the gravity of the offence is similarly examinable by a writ court."
13. CWP No.21863 of 2016 admits of no difficulty. The petitioners must succeed. The first respondent did not merely forfeit the EMD but refused to consider the petitioners' bid altogether solely on the ground that they had formed a cartel with M/s Sushil & Co. The petitioners were, therefore, in effect, debarred from participating in the tender process altogether, although they were otherwise qualified to do so.
14. An allegation that certain parties formed a cartel with a view to ensuring that the party inviting tenders is deprived the benefit of a fair price is serious. It is serious enough for the 7 of 16 ::: Downloaded on - 11-03-2017 15:23:12 ::: CWP-21863-2016, etc. - 8 -
party inviting tenders not to want to deal with them as it would rightfully form the opinion that it has been cheated. A false allegation of cartelisation is equally serious for it seeks to eliminate competition thereby also ensuring that the party inviting tenders is deprived the benefit of a fair price. Whatever be the ambit of the term "cartel", the notice inviting tenders used it in a pejorative sense. It is obvious that the term "cartelisation" in clause 12 of the MTF is used in a pejorative manner for the consequence thereof is the disqualification of the parties who form the cartel. A party inviting tenders would, therefore, be expected to consider an allegation of cartelisation with utmost seriousness. Normally, an issue in this regard would be a mixed question of law and fact.
15. The facts on record do not indicate that the first respondent or the members of the committee constituted by it considered the matter with any degree of seriousness. All that is placed on record in CWP No.21863 of 2016 is the private respondent's complaint dated 06.10.2016 and the agreement dated 09.02.2016 entered between Sushil Bansal, the sole proprietor of M/s Sushil & Co. and M/s Shree Shyamji Transport Co. The decision making process itself, therefore, was flawed. If there was any doubt in this regard, we would have relegated the petitioners to an alternate remedy. However, in the absence of any material whatsoever, it must be concluded that the committee and accordingly the first respondent came to the conclusion that the petitioners were guilty of cartelisation only on the basis of the complaint and nothing more. The decision making process itself, therefore, cannot be upheld.
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16. Even assuming that there was any substance in the complaint filed by the private respondent, the first respondent was not entitled to accept it without affording the petitioners an opportunity of dealing with it. The first respondent did not even seek the petitioners' response with regard to the complaint. The first respondent did not even inform the petitioners that it had received such a complaint or that it intended acting on the basis thereof. On this ground alone, the first respondent's decision to refuse to consider the petitioners' tenders cannot be sustained.
17. The first respondent was bound to follow the principles of natural justice relating to blacklisting a party including affording him an opportunity of dealing with the grounds of the proposed blacklisting. The action of respondent No.1 impugned in CWP No.21863 of 2016 is, therefore, unsustainable.
18. This brings us to CWP No.21864 of 2016 which challenges the decision of the official respondents rejecting the petitioners' technical bid for appointment as the Mandi Labour Contractor in respect of the Safidon Mandi also in district Jind. There are no reasons assigned by the committee for rejecting the petitioners' bid. It was submitted before us that the rejection of the petitioners' bid in relation to CWP No.21864 of 2016 was on account of the forfeiture of the EMD tendered in respect of the bid for the Mandi Transport Contract which is the subject matter of CWP No.21863 of 2016. This raises an interesting and important question of law relating to blacklisting/debarring parties from tendering for work with such organisations.
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or manner constitutes blacklisting. When a tender submitted by a party, who is otherwise eligible, is not considered, he is, in fact, debarred/blacklisted by the party inviting tenders. A party inviting tenders may blacklist a person for a variety of reasons. The effect, however, is the same. Notices inviting tenders at times deal with blacklisting and at times do not. A party inviting tenders has an inherent right to blacklist another. In this case, the terms and conditions of the notice inviting tenders stipulate the ground for blacklisting a party. Note (ii) of sub-clause 5(ii) of clause (iii) of Appendix-II of the e-tender notice, in the present case, stipulates that the parties whose EMD is forfeited by FCI will not be qualified. This clause does not deal with the forfeiture of the EMD. It deals with a case where the EMD is forfeited and stipulates the consequences thereof, namely, disqualification of the parties whose EMD has been forfeited. The clause clearly blacklists or debars the parties from participating in the commercial activities of the official respondents.
20. The submission that the Court in its writ jurisdiction ought not to interfere with the official respondents' decision to forfeit the EMD is misconceived. In interfering with the respondents' decision to disqualify the petitioners on account of their EMD having been forfeited, we do not interfere with the decision to forfeit the EMD but with the decision consequent thereto, namely, blacklisting the petitioners from participating in the tender process in other matters. Thus, while in the first case viz. the Mandi Transport Contract, the forfeiture of the EMD was consequent upon the petitioners having been held to have formed a cartel, in the second viz. the Mandi Labour Contract the blacklisting was consequent upon the forfeiture of the EMD.
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21. There are cases where government organisations and the State include a term in the notice inviting tenders that a party, though otherwise qualified, will not be entitled to submit a bid if it is blacklisted and/or its EMD has been forfeited by any other party such as another government or government agency or instrumentality of the State. Those cases are different and require different considerations. We do not intend expressing any view about the validity of such clauses and the manner in which the issue of blacklisting in such cases ought to be dealt with. The case before us is one where such a clause is included by the same organisation that forfeits the EMD in one contract and makes that the basis for disqualifying the party from participating in its other activities. There is less complication in such cases.
22. If the respondents are permitted to disqualify a party from submitting a tender in respect of a contract merely on account of the EMD of such a party having been forfeited in another contract, it would have the disastrous consequences of blacklisting the party without affording it an opportunity of being heard or dealing with the order of blacklisting in any manner whatsoever. This cannot be permitted. A term in a notice inviting tenders which disqualifies absolutely a party from submitting its bids merely on account of its EMD having been forfeited in another contract, is illegal being unreasonable, arbitrary and violative of the principles of natural justice. If the term merely confers a right upon the party inviting tenders or gives it the discretion to disqualify a party whose EMD had been forfeited in another contract, it would be valid. However, in such a case, the party inviting tenders would have to grant the party sought to be disqualified an opportunity of showing cause against the proposed 11 of 16 ::: Downloaded on - 11-03-2017 15:23:12 ::: CWP-21863-2016, etc. - 12 -
disqualification. Call it by any name, such a term, in effect, debars a party from participating in the tender process and must, therefore, have read into it the principles of natural justice as applicable to cases of blacklisting.
23. The clause in this case reads: "The parties whose EMD is forfeited by FCI will not be qualified". The clause is absolute in its terms which is clear from the words "will not". The clause entails an automatic blacklisting merely on the ground that the EMD has been forfeited. The clause does not stipulate the circumstances in and the reasons for which the EMD is forfeited. The notice inviting tenders does not restrict the grounds on which the first respondent may forfeit the EMD. In other words, the clause disqualifies a party from the tender process even when the EMD has been forfeited for an innocuous reason.
24. Having said that, however, it must be remembered that it is not necessary for a notice inviting tenders to include a clause for blacklisting in order to entitle the party inviting tenders to blacklist a person. A party inviting tenders has an inherent right to do so. It was so held by a Division Bench of this Court, to which one of us (S.J. Vazifdar, C.J.) was a party, in a case between the petitioners and the first respondent-2016 AIR (Punjab) 98 (paragraph-12). A party inviting tenders would be entitled to consider the forfeiture of EMD under one contract as a ground for disqualifying a party in respect of tenders invited for other contracts but only after following the procedure necessary for blacklisting/debarring a party. The forfeiture of the EMD under one contract cannot by itself be a ground for blacklisting a party in respect of other contracts. Terminating a contract is one thing.
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Blacklisting a party is another thing altogether. There may be a genuine difference in perception that leads to the termination of a contract and forfeiture of the EMD. Not every case of forfeiture of EMD, however, would justify the drastic consequences of blacklisting. Each case would have to be considered on its own merits. If the forfeiture is on account of a reason which justifies an inference that it is not desirable to enter into a contract with a party, a decision not to do so may well be justified. Thus, for instance, if the conduct of a party in respect of another contract has been such that the party inviting tenders would be justified in not wanting to deal with it for a certain period of time, it would be entitled not to do so. That, however, can be done after following the procedure relating to blacklisting which would include affording the party sought to be blacklisted an opportunity of meeting the same including by a personal hearing.
If, however, the forfeiture does not justify such a consequence, the party cannot be blacklisted. A party may, for instance, face a temporary disability on account of which it had, at the very initial stage, expressed its inability to proceed with the contract for no fault of its own. There may be no reason to believe that it would in future also face this difficulty. It may nevertheless be liable to have its EMD forfeited. To visit the consequence of blacklisting upon such a party would, however, not be justified.
25. The view that we have taken does not prejudice the respondents in any manner. As we mentioned earlier, a party inviting tenders has an inherent right to blacklist a party from participating in the tenders invited by it. It is not necessary for a notice inviting tenders to include a term entitling the party to 13 of 16 ::: Downloaded on - 11-03-2017 15:23:12 ::: CWP-21863-2016, etc. - 14 -
blacklist any category of person otherwise eligible from participating in the tender process. Thus, if a party's EMD has been forfeited for reasons which justify the party inviting tenders refusing to enter into a contract with such a party, it can always do so. In the present case also, it would be open to the official respondents to blacklist the petitioners provided the EMD was forfeited for such a reason. The mere forfeiture of the EMD, however, does not entitle the official respondents to debar the petitioners from participating in the tender process. The mere termination of a contract and/or the forfeiture of the EMD does not, absent anything else, compel the party to afford the other party an opportunity of being heard. The dispute in that regard must be settled as in the case of any other contract. When, however, such termination or forfeiture of EMD is followed by or is the basis of blacklisting the party, different considerations arise. It would be necessary for the party blacklisting to follow the rules of natural justice applicable in such cases.
26. The action of the first respondent impugned in CWP No.21864 of 2016 is also, therefore, unsustainable.
27. The nature of the inquiry in such cases of blacklisting is, however, bound to be different. As the proposed blacklisting is at the stage of considering the bids, it ought not to delay the award of the work. This is especially so in cases such as these which involve the transport of food-grain. When blacklisting is proposed at the stage when the tenders are considered, the hearing is bound, in appropriate cases, to be more summary in nature. If in such an enquiry the party is not blacklisted due to want of material, it can always be subsequently blacklisted on a more 14 of 16 ::: Downloaded on - 11-03-2017 15:23:12 ::: CWP-21863-2016, etc. - 15 -
comprehensive enquiry. This would be so if the initial enquiry leads only to a tentative conclusion.
28. We, however, regret our inability to grant the petitioners any substantive relief in either of the petitions in view of the passage of time and what has transpired in the meantime. Respondent No.3 was awarded the work and has been performing the same since October, 2016. About fifty per cent of the work is over. The private respondents in both the petitions by now must have invested a large amount for the purpose of carrying out the entire contract. It would be difficult to undo that all has been done thus far. Although respondent No.3 in CWP No.21863 of 2016 was the complainant, it is the official respondents who were responsible for the impugned orders. The petitioners are at liberty to adopt any proceedings including filing a suit for damages and/or compensation not only against the first respondent but even against the private respondent. If it is found that the complaint filed by the private respondent was mala fide for any reason, they would also be responsible.
29. Both the writ petitions are, therefore, allowed by quashing the impugned decisions to blacklist the petitioners. The official respondents are at liberty to initiate appropriate proceedings for blacklisting, if they so desire, in accordance with law. The petitioners are also at liberty to adopt proceedings for compensation and/or damages against all or any of the respondents. The EMD together with interest thereon at 10 per cent per annum from the date of payment till realization and the amount of Rs.1,00,000/- deposited pursuant to the order dated 26.10.2016 15 of 16 ::: Downloaded on - 11-03-2017 15:23:12 ::: CWP-21863-2016, etc. - 16 -
shall be refunded to the petitioners with accretions thereto, if any.
(S.J. VAZIFDAR)
CHIEF JUSTICE
06.03.2017 (ANUPINDER SINGH GREWAL)
Parkash JUDGE
NOTE:
Whether speaking/non-speaking: SPEAKING
Whether reportable: YES
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