Madhya Pradesh High Court
M/S Mishthi Industries Private Limited ... vs Union Of India on 26 November, 2024
Author: Milind Ramesh Phadke
Bench: Milind Ramesh Phadke
1
IN THE HIGH COURT OF MADHYA PRADESH
AT GWALIOR
BEFORE
HON'BLE SHRI JUSTICE MILIND RAMESH PHADKE
WRIT PETITION No. 30663 of 2024
M/S MISHTHI INDUSTRIES PRIVATE LIMITED
THROUGH DIRECTOR VEDANSH GARG
Versus
UNION OF INDIA AND OTHERS
Appearance:
Shri Ankur Mody with Shri Soumya Pawaiya - Advocate for the
petitioner.
Shri Praveen Niwaskar - DSG appearing on behalf of R-1
Shri Abhijeet Singh Tomar, learned counsel for the respondent.
------------------------------------------------------------------------------
Reserved on 06/11/2024
Delivered on 26/11/2024
--------------------------------------------------------------------------------
ORDER
1. The instant petition under Article 226 of the Constitution of India is directed against the order dated 26.09.2024 passed by respondent no.2, whereby account of the petitioner at GeM portal was suspended by the admin of GeM (Government-e-Market Place) from participting in any further bids for a further period of 24 months.
2. The aforesaid suspension order, as per the facts of the case, 2 was imposed upon the petitioner based on the allegations of violating the "One Bid per Bidder" rule and holding the petitioner to be indulging in anti-competitive behaviour. However, holding the order to be arbitrary, disproportionate and violative of natural justice, as no opportunity of hearing was granted before issuing the suspension order, the present petition has been filed.
3. Shri Ankur Modi, learned counsel for the petitioner primarily had assailed the said order on the ground that it was issued without providing the petitioner an opportunity to be heard which violates the fundamental principles of natural justice and fair play and also on the ground that imposition of 24 months suspension is arbitrary and excessive, especially when considering the petitioner's clean record in the previous bids and the lack of substaintive evidence to support the allegations of anti- competitive behaviour.
4. It was further argued that out of 231 bids highlighted by GeM, at 6 instances no action was taken against the petitioner after similar replies were submitted regarding allegations of anti- competitive behavior and violation of the 'One Bid per Bidder' rule and only at one instance, the petitioner was subjected to a 1- month suspension and the repetition of disciplinary action for the same alleged conduct amounts to double jeopardy, which is not only unjust, but is also impermissible under the principles of natural justice, as once the incident is closed after accepting explanantion for deviation, the same incident cannot be reopened 3 for the same cause and also looking to the fact that on earlier occasion explanantion tendered by the petitioner was accepted and the case was closed and now the respondents are denuded of the authority to raise/reopen the same incident again, therefore, the very show-cause notice issued to the petitioner on the GeM portal was without any jurisdiction and on the basis of that show- cause notice no action could have been initiated.
5. Learned counsel further while placing reliance on the Government-e-Market Place, (Incident Management Policy) applicable w.e.f. 01.04.2024, Clause 3.3 which deals with severe deviation and arise due to severe incidents of deviation which are those which adversely impact the reputation/credibility of the GeM platform and the process flow for handling the severe incidents would also be same as mentioned for serious incidents, would be based on the outcome of findings of the Show-cause notice and if no deviation at user end is found, the incident will have to be closed and in case there is an unsatisfactory explanantion by the buyer/seller/Service Provider, so far as buyer is concerned, the primary user and competent authority would be notified for necessary action and so far as seller/service provider is concerned, their account would be suspended by the GeM admin for the period of 60 days for first and second deviation within a period of 180 calender days and for 90 days for third and subsequent deviations within a period of 180 calender days which may be extended up to two years with approval from the Chief 4 Marketplace Officer-GeM, thus, from the aforesaid clause it could be gathered that any deviation which has taken placed for the third time or subsequent deviations within a period of 180 calender days shall entail suspension by the GeM admin for a period up to two years, therefore, it is required for the authority while imposing the maximum punishment looking to the severity of the deviation to assign reasons that too looking to the unsatisfactory explanantion given by either the buyer/seller/service provider.
6. While placing reliance in the matter of Gorkha Security Services vs. Govt. of NCT of Delhi reported in 2014 (9) SCC 105, it has been argued that looking to the provisions of Incident Management Policy various actions can be taken and penalties can be imposed by the department and in such a situation which action the Department proposes to take need to be specifically stated in the show cause notice and further it becomes all more important when the action of black listing and/ or forfeiture of earnest money/ security deposit is to be taken, then there has to be due application of mind by authority competent to impose penalty and merely because of the reason that clause 3.2 empowers the department to impose such penalty would not mean that specific penalty can be imposed without putting defaulting party to the notice to this effect and from bare perusal of the show-cause notice which has been issued to the petitioner, it would be evident that it was only on non-acknowledgment of the notice that an 5 action was proposed to be initiated including suspension of the account of the petitioner for a period up to two years and/or any other disciplinary action/proceedings in terms of GeM policy and on the flip side the petitioner was only required to file response to the show-cause notice within 10 calender days of the issuance of the notice, thus, the very issuance of the notice itself was alleged to be bad in law.
7. While placing reliance in the matter of Blue Dreamz Advertising Pvt. Ltd and Ors vs. The Kolkata Municipal Corporation and Ors passed in W.P. No.6616(W) of 2016 decided on 23.12.2016, it was argued that as blacklisting is a civil consequence, the rules of natural justice has to be scrupulously followed and this denotes that proper reasons have to be given while passing the order of the blacklisting and the reasons should suggest that the public interest would be affected if the petitioner is continued to be awarded contracts by the respondents or it was to be established that the petitioner was a dishonest business organisation, or irresponsible or wholly lacking in business integrity and the Government or a Government agency like the respondent should not blacklist the parties without assigning these reasons or reasons akin thereto, thus, it was submitted that the order Annexure P/1 whereby the petitioner has been debarred from participting in any further bids for a period of 24 months on the ground of "One Bid per Bidder" rule and indulging in anti- competitive behaviour, deserves to be quashed.
68. Per contra, Shri Abhijeet Singh Tomar appearing for respondent no.2 had supported the impugned order and has contended that looking to the clauses as mentioned in the Incident Management Policy of GeM the order of debarment of the petitioner from further bidding for period of 24 months cannot be faulted with and at 26 times which were randomly analyzed, it was found that the petitioner had shared a common IP address for bid submissions by M/s Kailadevi Traders and as per Ministry of Corporate Affairs (MCA) data one Priyanshu Garg acted as proprietor of M/s Kailadevi Traders and was also a former director of M/s Mishti Industries Pvt. Ltd from 09.06.2020 to 15.06.2023 and as both the bidders were allied firms, during the said period by virtue of participting in 230 bids during the said period, they had violated the GeM GTC clause 29 i.e. "One Bid per Bidder"
230 times and as the said infringment was severe deviation as per incident management policy of GeM, in view thereof the show- cause notice was issued which was not satisfactorily explained, therefore, the action taken by the GeM was in-conformity with the policy and, thus, needs no interference.
9. It was further argued that as per Clause 8 of the policy there is a provision of appeal which the petitioner has already availed, therefore, challenging the order of debarment in the present petition should not be entertained.
10. At this juncture, learned counsel for the petitioner submitted that in para 5.7 of the petition he has specifically 7 averred that the petitioner has already preferred an appeal as per Clause 8 of the policy which is pending before Appellate Authority and had prayed that till the said appeal is decided, the order impugned herein be kept in abeyance, but during the pendency of the petition vide an E-mail communication dated 16.10.2024 the appeal filed by the petitioner against suspension/blacklisting for the period of 24 months vide order dated 26.09.2024, have been informed to have been rejected and the grounds for rejection included allegations of violating "One Bid per Bidder" clause and the use of a common IP address, which authorities claimed to indicate collusive behaviour and in that regard he had moved an I.A. No.10730/2024, which is an application for amendment in the writ petition and to incorporate the facts, grounds, reliefs so far as the order of dismissal of appeal is concerned and as the appeal has been finalized, the same may be allowed to be incorporated. The said application has not been opposed by the otherside, hence the application I.A. No.10730/2024 is hereby allowed, the petitioner is hereby directed to carry out the amendment.
11. Since the matter has already been heard by this Court, this Court deems it fit to address upon the merits of the matter.
12. The order of debarment of the petitioner from participting in the bids for next 24 months has been passed on the ground that there was a severe deviation of clause 29 of the General Terms and Conditions on GeM 4.0 dated 17.07.2024 which reads as 8 under:
"29: One Bid per Bidder. A Bidder shall submit only one bid in a particular bidding process (unless otherwise allowed in the bid STC / ATC conditions). In case of a holding company having more than one independent manufacturing units or more than one unit having common business ownership / management, only one unit should quote. Similar restrictions shall apply to closely related sister companies. Bidder's sister/ Associated/ Allied concern(s) participating or applying against the same tender, shall lead to disqualification of Bidders. Sister / Associated / Allied concern means a company, society, partnership firm or proprietorship firm having one or more common persons as Director / Partner/ Member/ Owner. A Bidder who submits more than one bid will cause all the proposals submitted in the particular bid to be disqualified. In relation to the above, a person will include firm(s) of Proprietorship / Partnership Firm / Limited Liability Partnership / Private Limited / Limited company / Society registered under Society's Act / Statutory Bodies / any other legal entity, as the case may be, & will be deemed to have submitted multiple bids in a particular bid if a person bids in any of the two formats given below:
i. individual or proprietorship format and/or ii. a partnership or association of persons format and/or iii. a company format Whereby, A company shall for this purpose include any artificial person whether constituted under the Indian laws or of any other country.9
A person shall be deemed to have bid in a partnership format or in association of persons format if he is a partner of the firm which has submitted the bid or is a member of any association of persons which has submitted a bid.
A person shall be deemed to have bid in a company format if the person holds:
i. More than 10% (ten percent) of the voting
share capital of the company which has
submitted a bid, or
ii. Is a director and / or Key Managerial
Personnel of the company which has submitted a bid, or iii. Holds more than 10% (ten percent) of voting share capital in and/or is a director and / or Key Managerial Personnel of a holding company of that company which has submitted the bid.
By making a bid pursuant to the Tender Documents, the bidder / tenderer shall be deemed to have declared that the bidder / tenderer has not made any other bid or multiple bids as understood or deemed in terms of this clause.
All the bids of a bidder who has submitted multiple bids, as per the clause, shall be rejected and Bid Security for all such bids shall be forfeited, not by way of penalty or liquidated damages but by way of reimbursement of the pre-estimated costs likely to be incurred by the buyer towards bidding process and in the scrutiny & evaluation of bids. In addition to the above, bidders found to be in contravention to the said clause will be liable for administrative actions."
13. As per said clause a bidder is mandatorily required to 10 submit only one bid in a particular bidding process unless otherwise allowed in the bid STC/ATC conditions and in cases of a holding company having more than one independent manufacturing units or more than one unit having common business ownership / management, only one unit should quote and similar restrictions shall apply to closely related sister companies and bidder's sister/ Associated/ Allied concern(s) participating or applying against the same tender, and if such restriction is not adhered to shall lead to disqualification of bidders and in relation to the above a person will include firm(s) of Proprietorship/ Partnership Firm / Limited Liability Partnership / Private Limited/ Limited company/Society registered under Society's Act/Statutory Bodies/any other legal entity, as the case may be, & will be deemed to have submitted multiple bids in a particular bid, if a person bids in any of the two formats of individual or proprietorship format and/or a partnership or association of persons format and/or a company format. Apart from the rejection of the bid and forfeiture of the bid security clause 29 further provides that a bidder found to be in contravention of the said clause would be liable for administrative actions and the said administrative action has been provided under the incident management policy clause 3. As we are concerned with the severe deviation with which the petitioner has been saddled with, it is provided under clause 3.3. For reference Clause 3.3 is quoted herein below:
11"3.3 Severe Deviation: 3.3.1 The Severe incidents are those which adversely impact the reputation/ credibility of the GeM platform. The process flow for handling Severe incidents shall also be same as mentioned for serious incidents. 3.3.2 Based on the outcome of findings of the show-cause notice: A. If no deviation at user end- Incident will be closed B. In case, there is an unsatisfactory explanation by the Buyer/ Seller/ SP the following steps shall be taken: - a) Buyer - Primary user and competent authority to be notified for necessary action. b) Seller / SP suspended by the GeM admin for a period of • 60 days- for first & second deviation within a period of 180 calendar days • 90 days- for third and subsequent deviations within a period of 180 calendar days (and up to 2 Years with approval from Chief Marketplace Officer-GeM).
C. Deviation reflects in the overall Seller/Buyer rating."
14. As per clause 3.3.2 (B)(b) if based on the outcomes of the findings of the show-cause notice in case there is an unsatisfactory explanantion by the buyer/seller/service provider, then as far as seller/service provider is concerned, his account can be suspended by the GeM admin for the period of 60 days for first and second deviations within a period of 120 calender days and for the period of 90 days for third and subsequent deviations within a period of 180 calender days which may extent up to two years with approval from Chief Marketplace Officer-GeM.
15. Thus, from the aforesaid clause it would be evident that for third and subsequent deviations within a period of 180 calender 12 days, the suspension from GeM portal can be in between 90 days to two years. From the aforesaid clause it is also reflected that any deviation after third would be considered as a severe deviation adversly impacting the regulation/credibility of the GeM platform.
16. As per clause 3 which deals with the process flow for handling incidents on GeM, in cases of pre-contract deviations an incident once raised, will be acted upon with respect to the relevant clauses of the policy and no corrective actions against such incidents would be allowed and in cases of pre-contract incidences the GeM admin would ask for justification from the party who has raised the incident and also from the parties against whom it has been raised and on the basis of the said justification, the admin has powers to reject or escalate the incident and based upon outcome of findings shall impose penalty as proposed.
17. In cases of debarment or blacklisting the nature of the incidence may amount to civil death of any person or entity and the inability to conduct business with the entity who has passed such orders, thus, in cases of debarment or blacklisting compliance of principles of natural justice is of utmost importance and principles of fairness and proportionality is also required to be considered.
18. The Apex Court in the matter of Gorkha Security Services (supra) has observed that in the show-cause notice it is mandatory to mention the act of blacklisting or there should be clear inference to this effect as the purpose of show-cause notice was to 13 give a proper hearing to the parties by following the principles of natural justice. Thus, from the aforesaid it is very much clear that the show-cause notice should give clear intention of the proposed action and further in para 25, the Apex Court has held that there should be due application of mind by the authority competent to impose the penalty and merely because there is a clause which empowers the department to impose a penalty would not mean that specific penalty can be imposed. In the matter of Umc Technologies Private Ltd. vs Food Corporation Of India reported in 2021(2) SCC 551, it has been held that any notice for blacklisting or debarment has to clearly specify the reasons and the intentions and the same should be particularised and unambiguous in nature as it has civil consequences for future business prospects and had domino effect, which could effectively lead to the civil death and the purpose of issuing a show-cause notice is to make contracting party understand the gravity of the case being set up against it and the punishment that it might face. In the light of the aforesaid, this Court finds that the show-cause notice issued for debarment did not give clear understanding and the punishment that the petitioner would face, as only in the eventuality in case of non-acknowledgment of the receipt of such show-cause notice, the petitioner was informed that he would be saddled with the penalty of suspension for the period of two years.
19. Another fact which this Court finds that the rules of natural justice have not been scrupulously followed which denotes that 14 proper reasons have not been given while passing the impugned order. There is no discussion with regard to reply which was submitted by the petitioner nor there were any reasons which could suggest that public interest would be affected if the petitioner was continued to be awarded contracts by the respondents or it was even not established or discussed that the petitioner was dishonest business organisation or was irresponsible or wholly lacking in business integrity. Thus, from the bare perusal of the impugned order, this Court finds that the said order has been passed without assigning the above reasons or reasons akin thereto and simplicitor had inflicted the maximum penalty which according to this Court is not sustainable.
20. Accordingly, the show-cause notice dated 16.07.2024, the order dated 26.09.2024 Annexure P/1 as well as the order of appeal dated 30.09.2024 are hereby quashed. The matter is remitted back to respondent no.2 to issue a fresh show-cause notice to the petitioner clearly specifying the reasons and intentions and also the gravity of the case being set up against the petitioner and the punishment that it might face and, thereafter, pass a reasoned order looking to the severity of the incident.
21. Let the aforesaid exercise be completed within a period of two weeks from the date of receipt of certified copy of this order.
(Milind Ramesh Phadke)
Judge
chandni/ 26/11/2024
CHANDNI
NARWARIYA
2024.11.27
17:22:15
+05'30'