Gujarat High Court
Bharat Construction Company vs Vadodara Municipal Corporation on 6 December, 2018
Author: Vipul M. Pancholi
Bench: Vipul M. Pancholi
C/SCA/6173/2017 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 6173 of 2017
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or any
order made thereunder ?
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BHARAT CONSTRUCTION COMPANY
Versus
VADODARA MUNICIPAL CORPORATION
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Appearance:
MR.CHIRAG K SUKHWANI(6603) for the PETITIONER(s) No. 1
MR NILESH A PANDYA(549) for the RESPONDENT(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI
Date : 06/12/2018
ORAL JUDGMENT
1. Rule. Learned advocate Mr.Nilesh Pandya waives service of notice of rule for respondent.
2. This petition is filed under Article 226 Page 1 of 10 C/SCA/6173/2017 JUDGMENT of the Constitution of India in which the petitioner has prayed that the resolution/order dated 12.6.2014 passed by the respondent- corporation disqualifying and blacklisting the petitioner permanently be quashed and set aside.
3. Heard learned advocate Mr.Sukhwani for the petitioner and learned advocate Mr.Nilesh Pandya for the respondent-Corporation.
4. It is submitted by learned advocate for the petitioner that the petitioner-firm is engaged in the business of construction. The respondent-Corporation issued a tender for construction of internal roads of the society. The bid of the petitioner was accepted and work order was awarded to the petitioner for 31 societies. However, the dispute was with regard to poor construction work for two societies namely Saket Duplex and Shivam Society. It is alleged by the respondent-Corporation that the petitioner had not used the required quality of concrete while carrying out the work of construction of roads in the aforesaid two societies. It is submitted that so far as the said dispute is concerned, the alleged defects were rectified by the petitioner and the petitioner informed the respondent by communication dated 13.6.2014 and pointed out Page 2 of 10 C/SCA/6173/2017 JUDGMENT that the alleged defects were rectified and necessary reports and photographs were supplied along with the said communication to the respondent-Corporation. Even thereafter, in the year 2016 also, it was again pointed out to the respondent-Corporation that alleged defects were rectified long back by the petitioner.
4.1. It is further submitted that without issuing any show cause notice to the petitioner, the respondent-Corporation passed the impugned order/resolution by which the petitioner is permanently blacklisted. The petitioner has, therefore, challenged the said order by filing the present petition.
4.2. Learned advocate for the petitioner would contend that while passing the impugned order/resolution, opportunity of hearing was not provided to the petitioner and thereby the respondent-Corporation has violated the principles of natural justice and therefore only on this ground, the impugned order/resolution be quashed and set aside. Learned advocate for the petitioner placed reliance on the case of M/s Erusian Equipment and Chemicals Ltd. V/s State of W.B. And another reported in AIR 1975 SC 266(1), more particularly, on paragraphs 12,13 and 14.
Page 3 of 10C/SCA/6173/2017 JUDGMENT 4.3. He would further contend that while passing the impugned resolution/order, the respondent-Corporation has referred to the conditions of tender and the Rules of registration of contractor. At this stage,
learned advocate has referred to the terms of agreement, copy of which is produced at page 27 of the compilation. After referring to clause 12 of the said agreement, it is contended that even assuming that the respondent-Corporation is having power to blacklist the petitioner under certain circumstances, the order of permanent blacklisting cannot be passed. In support of the said contention, learned advocate has referred to the decision rendered by the Hon'ble Supreme Court in the case of M/s Kulja Industries Limited V/s Chief Gen.Manager, W.T.Proj.,BSBL and others, reported in AIR 2014 SC 9 and more particularly paragraph 24. It is further submitted that the impugned order of permanent blacklisting is passed in the year 2014 and by now the petitioner has suffered for a period of four years and therefore also the impugned order be quashed and set aside.
5. On the other hand, learned advocate Mr.Pandya has submitted that the respondent- Corporation passed a resolution by which it was decided to blacklist the petitioner permanently, Page 4 of 10 C/SCA/6173/2017 JUDGMENT copy of the said resolution is produced at page 246 of the compilation. It is submitted that if opportunity of hearing is not given to the petitioner, the petitioner can make representation before the Commissioner of the respondent-Corporation for the said purpose. He has further submitted that as per clause 12 of the agreement entered into between the petitioner and the respondent Corporation, powers are with the respondent Corporation to blacklist the petitioner under the stipulated circumstances. Learned advocate has also submitted that the present petition is required to be dismissed on the ground of delay in filing the present petition. He, therefore, urged that this petition be dismissed.
6. Having heard learned advocates appearing for the parties and having gone through the material produced on record, it has emerged that the agreement was executed between the petitioner and the respondent-Corporation for carrying out construction of road for 31 societies including the two societies namely Saket Duplex and Shivam Society and the work contract is also awarded. There is no dispute with regard to quality of work qua the other societies except Saket Duplex and Shivam Society. It is alleged by the respondent-Corporation that the petitioner has Page 5 of 10 C/SCA/6173/2017 JUDGMENT used poor quality of concrete while carrying work of the construction of road in the aforesaid two societies. Therefore, the respondent-Corporation passed the resolution, copy of which is produced at page 246 of the compilation. On the basis of the same, the Municipal Commissioner of respondent-Corporation has passed the impugned resolution/order, by which the petitioner is blacklisted permanently. While passing the said order, the respondent has placed reliance upon the terms of the agreement. Clause 12 of the said agreement empowers the respondent-corporation to terminate the contract or blacklist the contractor if there is breach of terms of the said agreement. However, there is no power of the respondent-Corporation to permanently blacklist the concerned contractor.
7. At the outset, the contention raised by learned advocate for the respondent with regard to the delay in filing of the present petition is required to be considered. It is revealed from the record that the petitioner was pursuing before the respondent-Corporation by filing representations and from time to time he has pointed out to the respondent-Corporation that the alleged defects were already removed long back. Along with the said representations, the petitioner had produced photographs and report of Page 6 of 10 C/SCA/6173/2017 JUDGMENT the third party. In spite of the same, the respondent-Corporation has not taken any decision. Further, because of the impugned order passed by the respondent-Corporation blacklisting the petitioner permanently, the petitioner is the sufferer. Hence, the submission canvassed by learned advocate for the petitioner with regard to delay in filing the present petition is not required to be entertained.
8. At this stage, the decision rendered by the Hon'ble Supreme Court in the case of M/s Kulja Industries Limited (supra) is required to be referred to. The Hon'ble Supreme Court has observed and held in paragraph 24 as under:
"24. Suffice it say that `debarment' is recognized and often used as an effective method for disciplining deviant suppliers/contractors who may have committed acts of omission and commission or frauds including misrepresentations, falsification of records and other breaches of the regulations under which such contracts were allotted. What is notable is that the `debarment' is never permanent and the period of debarment would invariably depend upon the nature of the offence committed by the erring contractor."
From the aforesaid decision, it can be said that the power of blacklisting or debarment can be exercised by the concerned authority against the concerned contractor. However, such debarment or Page 7 of 10 C/SCA/6173/2017 JUDGMENT blacklisting can never be permanent and the period of debarment or blacklisting would depend upon the nature of the offences committed by the erring contractor.
9. It is also not in dispute that the impugned order/resolution is passed by the respondent- corporation without issuance of any show cause notice or without giving opportunity of personal hearing to the petitioner. Thus, the respondent Corporation has violated the principles of natural justice while passing the impugned resolution/order. It is required to be noted that the order of blacklisting is a stigma and therefore before passing such order, reasonable opportunity of being heard is required to be given to the concerned contractor.
10. The Hon'ble Supreme Court in the case of M/s Erusian Equipment and Chemicals Ltd. (supra), has observed in paragraph 12 to 14 as under:
"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 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 Constitutional Article 14 speaks of equality before the law and equal protection of the laws. Equality of Page 8 of 10 C/SCA/6173/2017 JUDGMENT opportunity should apply to matters of 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.
13. But for the order of blacklisting the petitioner would have been entitled to participate in the purchase of cinchona. Similarly the respondent in the appeal would also have been entitled but for the order of blacklisting to tender competitive rates.
14. The State can enter into a contract with any person it chooses. No person has a fundamental right to insist that the Government must enter into a contract with him. A citizen has a right to earn livelihood and to pursue any trade. A citizen has a right to claim equal treatment to enter into a contract which may be proper, necessary and essential to his lawful calling."
Thus, from the aforesaid decisions rendered by the Hon'ble Supreme Court, it can be said that before passing the order of blacklisting or debarment, opportunity of hearing is required to be given to the affected parties. In the present Page 9 of 10 C/SCA/6173/2017 JUDGMENT case, admittedly, no such opportunity of hearing was given.
11. In view of the aforesaid discussion, this Court is of the view that the impugned order is required to be quashed and set aside mainly on two grounds i.e. (i) violation of principles of natural justice and (ii) order of permanent blacklisting cannot be passed. Accordingly, this petition is allowed. The impugned resolution/order dated 12.6.2014 passed by the respondent-corporation disqualifying and blacklisting the petitioner permanently is quashed and set aside. Rule is made absolute. Direct service is permitted.
(VIPUL M. PANCHOLI, J) SRILATHA Page 10 of 10